Euro US dollar (EUR/USD) strengthens ahead of ECB monetary policy meeting
The euro US dollar (EUR/USD) exchange rate is edging higher this morning amid shifting interest rate cut speculations.
At the time of writing the EUR/USD exchange rate is trading at $1.0931, up approximately 0.3% from this morning’s opening rate.
Euro (EUR) mixed ahead of ECB interest rate decision
The euro (EUR) is fluctuating this morning as markets brace for the European Central Bank’s (ECB) upcoming interest rate decision.
While the central bank is widely expected to keep interest rates on hold at its monetary policy meeting tomorrow, EUR struggles to edge higher against some of its peers, whilst firming elsewhere.
Shaan Raithatha, Senior Economist at Vanguard Europe, said:
‘The European Central Bank (ECB) is widely expected to remain on hold on Thursday and this meeting is unlikely to bring in major news. That said, there will be updated language on how the outlook for activity and inflation has evolved since June. Our judgement is that, if anything, a September cut is slightly more likely than six weeks ago.’
Meanwhile, inflation in the Eurozone was confirmed to have marginally cooled from 2.6% in May to 2.5% in June, dipping slightly closer to the central bank’s 2% target rate and paving the way for further interest rate cuts. Further signs of disinflation across the bloc serve to heighten anticipation from market and economists alike for tomorrow’s looming ECB rate monetary policy meeting.
Elsewhere, a tumbling US dollar (USD) lends the common currency some support, due to the currency pairing’s negative correlation.
US Dollar (USD) faces selling pressure
The US dollar (USD) is extending its recent losses this morning as ramped-up Federal Reserve interest rate bets and a spell of profit taking hammers the ‘greenback’.
As last week’s cooler-than-forecast US inflation continues to weigh on USD, lingering concerns about the US labour market and a weakening US economy sees surging Fed rate cut speculations continue to deter investor interest in the US dollar.
Amid a key week of Fed commentary, markets will watch Fed Chair Jerome Powell with a keen eye for any further dovish signals, after he noted the ‘disinflationary path’ seen in recent US releases.
Further pressuring the US Dollar today is an increasing appetite for risk, serving to limit the safe-haven USD’s movements.
Euro US dollar exchange rate forecast: ECB in spotlight
Looking ahead, the ECB’s latest monetary policy meeting will likely be the core catalyst of EUR movement tomorrow. With markets expecting the ECB to leave interest rates unchanged, the onus will be on the central bank’s forward guidance and accompanying press conference.
Additionally, any notable commentary from ECB President Christine Lagarde could spark movement within the common currency as shifting ECB rate cut bets fuel movement.
Looking to the US, the latest initial jobless claims data is due out. Should the number of newly unemployed American citizens claiming benefits hold close to a three-month-high, signs of slack in the US labour market could apply pressure to the ‘greenback’.