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Euro US Dollar Exchange Rate News: EUR/USD Tumbles on Tight US Labour Market

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Euro US Dollar Exchange Rate Crashes as Fed Rate Hike Bets Soar

The Euro US Dollar (EUR/USD) exchange rate is crumbling as US jobless claims hit two-month low, elevating rate hike expectations from the Federal Reserve.

At time of writing the EUR/USD exchange rate is trading around $1.1148, a 0.69% drop from this morning’s opening levels.

US Dollar (USD) Soars on Further Tightening Expectations

The US Dollar (USD) is rallying in the afternoon session today after a quiet morning. The latest initial jobless claims sent the ‘Greenback’ soaring on renewed rate hike bets from the Fed.

With figures revealing the number of Americans filing for unemployment benefits dropped by 9000 to 228,000, a two-month low. Coming under expectations, the reading will surely give the Fed a headache as it debates over how restrictive its policy will go.

However, USD investors were cheered on the latest data as the labour market remains stubbornly tight, bolstering the need for further interest rate hikes. Rubeela Farooqi, Chief US Economist at High Frequency Economics, commented on the data:

‘The claims data show that the labour market remains resilient and businesses have yet to start shedding workers at a rapid pace, despite five percentage points of tightening.’

Euro (EUR) Tumbles on USD Correlation

Despite a marked improvement in consumer sentiment in the Eurozone, the Euro (EUR) is not enjoying its negative correlation with the US Dollar.

Preventing further losses, however, is the latest survey that shows the highest consumer sentiment since February 2022. The Euro area Consumer Confidence Indicator improved by 1.1% in July, signalling the highest reading since before the Ukraine invasion broke out.

With inflationary pressures modestly waning, food and energy prices are starting to come down, sentiment is improving. The report added that ‘consumer confidence is slowly but steadily recovering towards its long-term average.’

Euro US Dollar Forecast: Stuttering PMIs to Dent the Euro?

Without any major data left this week, looking ahead, the Euro US Dollar exchange rate could see further movement with the latest PMI data on Monday.

With both US and Eurozone PMIs set to be released on Monday, Germany’s flagging economy could weigh heavily.

As for the US Dollar, an expected decline in both manufacturing and services PMI could dent the ‘Greenback’.