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EUR/USD Exchange Rate to remain below Parity on Hawkish Fed Rate Hike Bets

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EUR/USD Exchange Rate Weakened amid Fed Rate Hike Bets

The Euro US Dollar (EUR/USD) exchange rate is struggling this afternoon as Federal Reserve rate hike optimism continued to underpin the ‘Greenback’.

At the time of writing the EUR/USD exchange rate is trading at around $0.9993, which is a 0.3% decrease from this morning’s opening rate.

US Dollar (USD) to be Underpinned by Fed Rate Hike Bets?

The US Dollar (USD) is strengthening today, a trend which could continue into the latter half of the week amid Federal Reserve interest rate speculation.

Fed policymakers have been increasingly hawkish in recent speeches.

Fed policymaker Thomas Barkin reiterated the US central bank’s commitment to returning inflation to the bank’s 2% target in a speech on Tuesday.

This hawkish trend is expected to continue with a speech by the Fed’s Loretta Mester this afternoon.

 Mester has been vocal about raising rates to 4% and holding them there. She reiterated the point this afternoon saying central banks will keep increasing interest rates to tackle inflation.

In the wake of her hawkish comments USD exchange rates continue to strengthen.

Looking ahead to the second half of the week, The ISM Manufacturing PMI for August is set for release tomorrow. If the figures print as forecast, then the slowing in factory sector growth may drag on the US Dollar. 

Euro (EUR) To Recoup on Government Intervention?

The Euro (EUR) is weak today as the ongoing energy crisis and the European inflation rate data leaves investors downbeat.

Inflation figures for August beat forecasts, rising from 8.9% to 9.1%.This data showcases the gloomy economic mood suppressing the Euro and  highlights pricing pressures being faced by households in the bloc.

The lasts inflation figures will put pressure the European Central Bank (ECB) to aggressively hike interest rates. Investors are speculating that the bank will hike rates a further 75bps at their September meeting.  

Rising inflation is tied into soaring energy prices, which could be made worse as the Nord stream pipeline has been shut off for three days.

This has EUR investors focused on ‘emergency intervention’ announced by the EU on Monday. It is hoped that the intervention will help curb spiking energy prices in the Eurozone.

Following the announcement on Monday  the Euro saw a slight up-tick. Is it possible that quick intervention will see the currency recoup some of its loss over the energy crisis?

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