Euro US Dollar (EUR/USD) Exchange Rate Trends Sideways amid Risk Appetite Retreat
The Euro US Dollar (EUR/USD) exchange rate is trading within a narrow range today. A risk-off market mood may be preventing any drastic falls for the pairing, as well as bets on additional hikes from the European Central Bank (ECB).
On the other hand, the exchange rate may be coming under pressure from persistent Federal Reserve rate hike bets.
At time of writing the EUR/USD exchange rate is at around $
Euro (EUR) Subdued amid Lack of Data
The Euro (EUR) is seeing limited movements against its peers today. A retreat in global risk appetite may be limiting losses for the single currency.
A lack of data may be causing enthusiasm for the single currency to be motivated by ECB rate hike bets. Hawkish comments from multiple policymakers in recent days have likely added to bets on the move.
The most recent of these was board member Klaas Knot. Speaking today in Dublin, Knot said:
‘Inflation is still much too high. Mildly restrictive territory will not be enough to counter an underlying inflation rate that has been creeping up towards 6%. We need a sufficiently restrictive stance.’
Earlier in the week, ECB President Christine Lagarde signalled that the central bank currently had no need to change its 2% inflation target.
US Dollar (USD) Muted as USD Finds Support from Fed Rate Hike Bets
The US Dollar (USD) is subdued today ahead of key data later today. A cautious market mood may be underpinning the safe-haven ‘Greenback’.
Persistent bets on an additional interest rate rises from the Federal Reserve may also be lending support to USD today. A poll of economists released by Reuters today found a majority favouring a 25bps rate hike from the central bank at its May meeting.
Some economists have stated that current data trends could lead to even more hikes from the Fed this year.
Andrew Hollenhorst, chief U.S. economist at Citi, said:
‘If the labor market stays resilient and inflation stays persistent – as they do in our forecasts – the Fed is likely to hike not only in May but again in June and July’.
The survey also indicated that the Fed would keep rates unchanged for the rest of 2023, and that the central bank may cut rates in 2024. These predictions may be weighing on USD today.
EUR/USD Exchange Rate Forecast: Will ECB Bets Continue to Bolster Euro?
The Euro could find support later today from a forecast rise in April’s consumer confidence figures. The indicator is set to rise to -18, which if it prints as forecast would be the highest reading in more than a year.
The latest PMIs for the Eurozone could have a mixed effect on the single currency on Friday. Whilst manufacturing sector output is set to improve, the trading bloc’s services sector is forecast to edge lower. Services performance is expected to remain in positive territory however, which could stem any losses for EUR.
The US Dollar could come under pressure today following the release of the latest jobless claims figures. Claims for the week ending April 15 are expected to edge higher to 240,000. Markets could take the data as signs of coolness in the US labour market.
USD will also see April PMIs on Friday, which could dent confidence in the currency if they print as forecast. Performance across all private sectors is expected to fall, which could increase speculation on a recession for the US economy this year.
