The Euro Doesn’t Benefit from ECB September Hike Rhetoric, Pointing Down
Today we have seen some slight buying pressure in EUR/USD, although that has come from the USD side, as the Treasury bonds were being sold off earlier, which was helping erase some of yesterday’s gains in the US dollar, during European trading today. The US dollar has seen a slight decrease in value, but it’s not a significant drop. USD/JPY briefly reached a low of 147.03 but is currently hovering around the 147.30-40 levels.
Meanwhile, EUR/USD has increased by 0.2% to 1.0750, although these are the most notable movements among currency pairs, with minor changes in others, indicating a lack of strong market sentiment at this point for EUR/USD.
In terms of news headlines, ECB policymakers have given some strong signals about the possibility of a rate hike in next week’s meeting.
Remarks by ECB Policymaker, Peter Kazimir
- The preferable option would be to hike rates by 25 bps next week
- One more, likely last rate hike, still needed
- The alternative option would be to hike in October or December
- Inflation remains stubbornly high, price growth expectations too far above 2%
As we move closer to the decision next week, it looks like maybe ECB policymakers are starting to break rank. This is one of the more direct and hawkish takes as compared to the others, which are just alluding to a rate hike being a mere “possibility”.
But, the Euro didn’t really mind their comments much, at a time when most analysts don’t expect any more rate hikes by the FED. This divergence should have been keeping EUR/USD bullish, but the Euro has been quite weak. However, these developments are not particularly surprising or new at this stage. The economic data is pointing to a possible recession, as today’s data confirmed. So, markets are expecting the ECB to stall after this rate hike.
Eurozone July Retail Sales From Eurostat – 6 September 2023
- July retail sales MoM -0.2% vs -0.1% expected
- June retail sales were -0.3%; revised to +0.2%
It’s a mixed report as there was a positive revision to the June numbers at least. Looking at the breakdown, retail sales dipped in July mainly thanks to a decline in auto fuel purchases (-1.2%). Meanwhile, there were positive increases in food sales (+0.4%) and non-food products (+0.5%) on the month.
EUR/USD Live Chart
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