Euro US Dollar Exchange Rate Fluctuates as Investors Await Fed Speeches
The Euro US Dollar (EUR/USD) exchange rate is trading narrowly as market sentiment remains cautious as global slowdown fears linger.
At time of writing the EUR/USD exchange rate is trading around $1.0957, relatively unchanged from this morning’s opening levels.
US Dollar (USD) Supported by Hawkish Fed
The US Dollar (USD) remains fairly quiet this morning as investors shift to the sidelines in anticipation of a string of speeches from Federal Reserve policymakers. With a particularly hawkish central bank, the recent run of disappointing data has tempered rate hike bets.
The minutes released from the last policy meeting from the Fed pointed to a return to tightening, and the June pause was only short-term. Furthermore, the recent drop in the jobless rate, and a stronger-than-expected wage growth, Fed rate hike bets were bolstered further. With inflationary pressures very much still apparent in the US economy, the Fed will have to keep making moves to bring inflation down to target level.
With a 25bps rate hike all but priced in for the July meeting, the focus will be on beyond the next policy meeting in September, and how much further the Fed will tighten its monetary policy.
Euro (EUR) Undermined by Shaky Economy
Meanwhile, the Euro (EUR) remains under selling pressure but is preventing a further slide thanks to a persistently hawkish European Central Bank (ECB).
Comments from ECB Governing Council member, and Bank of Portugal Governor, Mario Centeno, on Friday could still be supporting the Euro. Talking about the central bank’s battle against inflation, Centeno believes that inflation in the Eurozone will come under 3% by the end of the year. He added:
‘Inflation is coming down faster than the way up, (and) we need to fuel this process and be very confident we can make it. The labour market is the strongest it’s ever been.’
Euro US Dollar Forecast: Fed Speeches to Boost the US Dollar?
Looking ahead, the Euro US Dollar exchange rate could see further movement with a string of speeches from Fed policymakers. With many high-profile and hawkish speakers, the US Dollar could find fresh tailwinds if talks of a September rate hike were to materialise.
Meanwhile, the Euro could be at the mercy of its negative correlation with the ‘Greenback’ if the latter strengthens. In the meantime, market sentiment could be the biggest driver of movement for the single currency.
