Euro US Dollar (EUR/USD) Exchange Rate Gains amid USD Sell-Off
The Euro US Dollar (EUR/USD) exchange rate is climbing higher today after hawkish signals from European Central Bank (ECB) President Christine Lagarde earlier today. A gradual return of risk appetite may also be helping to boost the currency pair amid a US Dollar (USD) sell-off. Significant gains for EUR/USD could be limited by expectations of aggressive future action from the Federal Reserve, however.
At time of writing the EUR/USD exchange rate is at around $1.0531, which is up around 0.4% from this morning’s opening figures.
Euro (EUR) Climbs as Lagarde Signals July & September Rate Hike
The Euro (EUR) is making steady gains against many of its rivals today. Hawkish signals from the ECB’s President Christine Lagarde is likely helping the single currency to climb higher today.
Speaking today, Lagarde reaffirmed the central bank’s plans to raise interest rates in July. Lagarde also signalled that rate hike in September may also be on the cards.
In a speech to European lawmakers, Lagarde said:
‘These decisions underpin our previous commitments to adjust all of our instruments within our mandate, incorporating flexibility if warranted, to ensure that inflation stabilises at our 2% target over the medium term.’
Lagarde also sought to calm fears over potential fragmentation within the Eurozone. This may also be helping the single currency edge higher.
Major gains may be being limited by a fall to output in the trading bloc’s construction sector, however. Production levels in the Eurozone’s construction sector fell by 1.1% in April, increasing concerns that the trading bloc’s recovery may be struggling.
US Dollar (USD) Falls amid Risk-On Market Mood
A lack of any significant data releases has left the US Dollar (USD) at the whim of market sentiment today. The currency has seen a fresh wave of selling and likely contributing to USD’s fall today. A downturn to US Treasury bond yields as well as a risk-on market mood may also be weighing on the safe-haven ‘Greenback’ today.
Continued support for an aggressive policy of future rate hikes may be limiting any major downturns for the currency, however. Despite a record rate hike last week, investors were initially disappointed with less hawkish than expected forward guidance from the Fed. Policymakers have sought to dispel these fears in recent days.
Speaking on Saturday, Fed Governor Christopher Waller said:
‘If the data comes in as I expect, I will support a similar-sized move at our July meeting. The Fed is ‘all in’ on re-establishing price stability.’
EUR/USD Exchange Rate Forecast: Will Powell Reaffirm Hawkish Fed Outlook?
Looking ahead for the Euro, a predicted drop to Eurozone and German PMI figures in June could dent EUR on Thursday.
Additionally, if German business confidence falls as forecast on Friday then it could push the single currency lower amid fears over the trading bloc’s economic recovery.
For the US Dollar, multiple speeches from Fed Chair Jerome Powell throughout the week could help to bolster USD. Powell has historically been hawkish in regards to the central bank, although investors may have some doubts given the central bank’s less aggressive than expected forward guidance last week.
Thursday’s data could limit any potential gains for the currency, however. A forecast fall to growth across all US private sectors could push USD lower if PMI figures print as forecast. Jobless figures are also predicted to drop slightly, although the high level could limit any major falls for the currency.