The Euro US Dollar (EUR/USD) exchange rate rose on Wednesday. The currency pair was bolstered by several better-than-expected data releases for the Eurozone. Additionally, bets on a 50bps interest rate hike from the European Central Bank (ECB) at their next meeting helped to boost EUR/USD.
At time of writing the EUR/USD exchange rate was at around 1.0492, which was up roughly 0.2% from that morning’s opening figures.
The Euro (EUR) climbed on Wednesday. The single currency potentially saw a boost from a retreat in global risk appetite. Better-than-expected data releases for the Eurozone also added to EUR’s upward momentum.
Wednesday saw an upward revision in the third estimate of third quarter GDP growth figures for the Eurozone.
The data printed growth of 0.3% versus the forecast 0.2% as increased household and business spending lend support to the trading bloc’s economy. Experts are predicting a recession in the Eurozone’s fourth quarter however amid soaring energy costs.
A lower-than-forecast fall in Germany’s industrial production for October also pushed EUR higher. The overall impressions from the data were not positive however, with the more gradual slip into negative territory still set to bring about a recession. It’s thought that stimulus from the German government helped to limit the slump in October.
‘Today’s industrial production data has two messages: German industry, excluding energy-intensive sectors, is more resilient than some pessimists had thought but at the same time, the gradual slide into recession still looks unavoidable.’
The Euro saw further support on Wednesday from the European Central Bank’s (ECB) continued hawkish stance. Markets continued to price in a 50bps interest rate hike from the central bank at their December meeting.
Consumer expectations of further rises in Eurozone inflation added to expectations of more aggressive action from the ECB. The latest survey from the central bank saw median inflation expectations over the next 12 months rise to 5.4% in October.
The US Dollar (USD) stumbled on Wednesday. A downturn in US Treasury bond yields weighed on the currency.
The safe-haven ‘Greenback’ struggled to benefit from the prevalent risk-off market mood, although the sentiment likely helped limit USD’s losses amid fears of a global recession.
USD also saw its losses capped by persistent market bets on a bumper interest rate hike from the Federal Reserve.
Following robust jobs data last week, investors are now anticipating a minimum 50bps interest rate hike at the central bank’s next meeting.
EUR/USD Exchange Rate Forecast: Will PPI Uptick Add to Bets on Bumper Fed Rate Hike?
Looking ahead for the US Dollar, the forecast uptick in initial jobless claims on Thursday could do little to deter bets on a tight labour market. The latest figures are expected to remain close to the previous week’s. If the data prints as forecast, then it could bolster USD.
On Friday, a predicted slight uptick in November’s producer price inflation could also boost the currency. PPI figures are expected to have remained stagnant last month, although core PPI is forecast to rise. The data could add further fuel to Fed rate hike bets and push USD higher.
Also on Friday, December’s consumer sentiment figures are expected to edge higher although remain close to its June lows. The data could dent confidence in the US Dollar.
USD could also be affected by any further shifts in Fed rate hike expectations this week. Markets now seem to be gravitating toward a larger rate hike from the central bank.
For the Euro, two speeches from ECB President Christine Lagarde on Thursday could prompt fresh movement in the single currency. Recent speeches from ECB policymakers have signalled support for a 50bps rate hike. If Lagarde also sticks to this hawkish path, then it could boost EUR.
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