Fri. Jun 9th, 2023

The Euro US Dollar (EUR/USD) exchange rate saw moderate gains amid a cautious market mood. Upbeat economic data is supporting the Euro as USD investors continue to digest the Federal Reserve’s hawkish stance.
At time of writing the EUR/USD traded around $1.0608, a 0.22% climb from this morning’s opening levels.
The Euro (EUR) is supported by a third straight month of improving business confidence in Germany. The Ifo Business Climate Index improved better than expected as pessimism continued to retreat in Europe’s largest economy.
The highest level since August, the index ticked higher to 88.6, against an expected 87.4. Despite lofty inflation remaining, and the energy crisis not yet abated, businesses in Germany have a much-improved view on the future. Klaus Wohlrabe, economist at the Institute for Economic Research (Ifo), commented:
Elsewhere, further lending modest support to the single currency is the maintained hawkish stance from the European Central Bank (ECB). ECB policymaker Gediminas Simkus gave credence to further interest rate hikes by stating that there will be another 50bps rate hike in February.
Meanwhile, the US Dollar (USD) struggled to regain its fine form from last week as investors continued to digest the latest hawkish Fed outlook. Despite a souring market sentiment, the ‘Greenback’ failed to capitalise on risk-off flows.
bannerA lack of major data left the US Dollar to trade on market sentiment, and in the wake of the central bank decision, investors remained cautious. A return to negative headlines out of China weighed heavily on risk sentiment and saw the riskier currencies slide.
China reported the first Covid death since restrictions were eased, as outbreaks gathered pace once again. However, reports of doubts over the official death toll have heaped more pressure on the world’s second largest economy, and in turn, the global market mood. Experts are now fearing that the death toll could rise as high as 1.5million in the coming months. Yanzhong Huang, global health specialist at the Council on Foreign Relations (CFR), said of the situation:
Looking ahead, the Euro US Dollar exchange rate could be left exposed to market mood as the trading calendar remains relatively thin for the week.
The US Dollar could regain steam if global market sentiment remains subdued amid further negative headlines out of China. A continued hawkish Fed could also inspire investors.
Meanwhile, the Euro is likely to see fluctuations this week. Speeches from ECB Vice President Luis de Guindos could influence movement if he maintains a hawkish stance.

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