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Euro US Dollar (EUR/USD) Exchange Rate Rangebound as ECB Signals Further Rate Hikes


Euro US Dollar (EUR/USD) Exchange Rate Trends Sideways amid Risk-On Mood

The Euro US Dollar (EUR/USD) exchange rate is trading within a narrow range today. A risk-on mood may be preventing the pairing from making any significant gains.

On the other hand, hawkish ECB comments and a rise in German PPI could be lending support to EUR/USD.

At time of writing the EUR/USD exchange rate is at around $1.0841, which is virtually unchanged from this morning’s opening figures.

Euro’s (EUR) Losses Cushioned by Hawkish ECB Rhetoric

The Euro (EUR) is slipping today amid a resurgent risk-on mood. Hawkish signals from the ECB may be cushioning any losses for EUR, however.

Speaking as part of a panel at the World Economic Forum (WEF) today, ECB President Christine Lagarde reiterated her belief that the central bank should ‘stay the course’. Markets are largely expecting further aggressive action from the ECB in the coming months.

A rise in the latest PPI figures for Germany may also be lending support to the Euro today. PPI in December rose 21.6% year-on-year which was above forecasts. The increase in inflationary pressures added to the ECB’s hawkish signals.

US Dollar (USD) Pulled Lower by Return of Risk Appetite

The US Dollar (USD) is falling against its peers today. A return of global risk appetite may be weighing on the safe-haven ‘Greenback’.

Bets on a softer pace of policy tightening from the Federal Reserve may also be pushing USD lower. A speech by Fed policymaker Patrick Harker today signalled that the central bank may move to 25bps rate hikes at its upcoming meetings.

Recession fears could also be deepening losses for the US Dollar today. Recent downbeat retail sales and PPI figures earlier in the week have increased concerns of a protracted downturn.

More hawkish comments from Fed board members in recent days may be helping to stem losses for USD, however. Speaking on Thursday, Federal Reserve Governor Lael Brainard hinted that the central bank would keep interest rates high.

EUR/USD Exchange Rate Forecast: Will Positive Eurozone PMIs Lend Support to EUR?

Looking to the coming week for the Euro, consumer confidence figures for the Eurozone could dent confidence in EUR on Monday. January’s data is expected to remain in negative territory for a twelfth consecutive month.

The latest PMIs for German and Eurozone private sectors could lend support to the Euro if they print as forecast on Tuesday. Eurozone service sector output is expected to have returned to growth in January alongside an uptick in performance across other private sectors.

A predicted uptick in German business confidence could prompt further gains for the Euro if Wednesday’s figures print as expected.

For the US Dollar, a speech from Fed board member Christopher Waller later today may prompt movement in USD if he signals any significant policy shifts from the central bank.

Looking to the coming week for USD, the latest private sector PMIs on Tuesday could pull the currency lower if they remain in negative territory.

A forecast slowdown in fourth quarter GDP growth could also pull USD lower on Thursday. On the other hand, any losses driven by this data could be limited by an expected recovery in durable goods orders. Finally on Friday, the US Dollar could see a boost if the core PCE price index edges higher as forecast. The index is the Fed’s preferred measure of inflation, and any rise could also prompt an increase in Fed rate hike bets.