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EUR/USD Exchange Rate Buoyed by Cheery Market Mood

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EUR/USD Exchange Rate Jumps amid Improving Risk Appetite

The Euro US Dollar (EUR/USD) exchange rate is rallying today as an upbeat market mood undermines the safe-haven ‘Greenback’, whilst the Euro is supported by hawkish European Central Bank (ECB) comments.

At the time of writing, the EUR/USD exchange rate is trading at around €1.0980, roughly up 0.5% from this morning opening rate.

US Dollar (USD) Slumps amid Risk-On Mood

The US Dollar (USD) is struggling to find support today, as an increased appetite for risk sweeps the markets, ultimately undermining the safe-haven currency.

With notable data for the ‘Greenback’ in short supply today, we have seen the currency trade on market mood alone.

Further weighing on the US Dollar are growing expectations that the Federal Reserve will begin cutting interest rates early next year.

CME’s FedWatch tool suggests that investors are currently pricing in a roughly 75% chance of the US central bank starting its cutting cycle in March.

Euro (EUR) Firms on Hawkish ECB Remarks

The Euro (EUR) is firming against most of its peers today as it is supported by hawkish rhetoric from ECB policymakers.

The continued support for the single currency appears to stem from hawkish comments from ECB officials earlier in the week as they pushed back on interest rate cut speculation.

‘The market pricing has lowered the level of restriction and this recent accommodation priced into interest rates is inconsistent with the stance appropriate to return inflation to target,’ said Vasle, who is seen as a one of the more conservative members of the ECB’s Governing Council.

He expressed:

‘Market expectations for interest rates cuts are premature in my view, both with regard to the start of cuts and the totality of moves,’ he told Reuters.

This uptick in the Euro also comes despite the final Eurozone inflation report confirming a sharp cooldown in inflation.

The finalised consumer price index for the Eurozone printed as expected, with headline inflation printed at 2.4% in November, falling from 2.9%, the lowest it has been since July 2021.

EUR/GBP Forecast: Euro Could Climb if Consumer Confidence Improves

Looking ahead at the Euro, tomorrow will see the release of the German consumer confidence report. The index previously printed at -27.8, with market forecasters predicting sentiment as we head into January will have seen a modest improvement. If the index prints as expected or shows an increase in household morale, this could lend the single currency support.

On the other side of the Atlantic, tomorrow will also see the publication of the latest US consumer confidence index. Could an improvement in household sentiment help to revive USD demand?