Euro US Dollar (EUR/USD) Fluctuates amid Sinking Fed Rate Hike Bets
The Euro US Dollar (EUR/USD) exchange rate is volatile today, as Federal Reserve commentary and Eurozone pessimism undermine the currency pairings movements.
At the time of writing the EUR/USD exchange rate is trading at $1.0691, virtually unchanged from this morning’s opening rate.
US Dollar (USD) Volatile following Mixed Fed Commentary
The US Dollar (USD) is choppy today as Federal Reserve commentary sways investor interest.
The ‘Greenback’ began the day on a high, as an ongoing wave of cautious trade led investors to the safe-haven USD.
However, a speech from Federal Reserve Chair Jerome Powell this afternoon is driving USD volatility. Powell’s widely anticipated speech did not address monetary policy or the direction of interest rates. Subsequently, economists and investors alike speculate that the Fed may have reached the end of its hiking cycle.
Edward Gardner, Commodities Economist at Capital Economics, stated:
‘We forecast the Fed to cut rates faster than the market expects next year’.
Following last week’s seemingly dovish hold on interest rates, Fed officials have offered mixed comments regarding the path forward, indicating that further economic data is needed before any decisive tone can be adopted. Amid Powell’s silence, the ‘Greenback’ retreats from recent wins ahead of further economic data releases.
Euro (EUR) Mixed amid Economic Uncertainty
The Euro (EUR) is volatile today as bleak economic data caps the common currencies upside potential.
Lower-than-forecast retail sales data in the Eurozone showed declining consumer activity throughout September. The data came in at -0.3%, reinforcing recent economic slowdown concerns, which were bolstered by yesterday’s dismal German industrial production data reports. As such, European Central Bank (ECB) rate hike bets have slipped in recent days, denting the common currency.
However, today’s speech from European Central Bank (ECB) Chief Economist Philip Lane tilted ongoing speculations of accommodative monetary policy, as Lane argued that further rate hikes should not be ruled out. He commented:
‘You do see some progress (in underlying inflation), but not yet enough’.
In the wake of Lane’s speech, ECB hike bets rose, allowing the Euro to gain ground against USD.
Euro US Dollar Exchange Rate Forecast: USD to Dip Under Jobs Data?
Coming up, employment data could drive USD volatility on Thursday. Initial jobless claims for the week ending 4th November are expected to report a slight uptick, from 217,000 to 218,000. Continuing jobless claims data is also due to report a marginal increase in ongoing benefit claimants. Should the data print as forecast, USD may stumble amid signs of a loosening labour sector. As last week’s bleak non farm payrolls came in lower-than-expected, additional weak employment data in the coming days could underpin concerns of cooling US employment. As a result, sinking Fed rate hike bets and denting USD.
A series of Federal Reserve speeches throughout the week may also sway investor interest in USD. Should Fed policymakers adopt a dovish approach in line with recent commentary, USD may stumble.
Like its US counterpart, EUR movement may also be driven by speeches from European Central Bank officials. President Christine Lagarde and Chief Economist Philip Lane are both due to speak on Thursday. Amid a surge in bleak economic data this week, ECB commentary is expected to take a tentative approach towards monetary policy, which could see the EUR falter. However, should policymakers echo Lane’s hawkish commentary, the Euro may rally.