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Hawkish ECB commentary could help euro limit its losses

EUR/USD has recovered after falling towards 0.9900. Markets are expecting a 70% probability of a 75 basis point rate hike by the Fed in September. 

 

Hopeful comments from ECB officials could help the single currency limit its losses.

Inhalt

  • Recap trading week

  • Interest rate hikes in prospect

  • Concerns about devaluation of the euro

  • Adaptation of our trading systems

Recap trading week

After weekly losses, EUR/USD started the new week under slight downward pressure, falling back to 0.9900 before recovering. The risk-averse market environment favors the dollar at the start of the new week, but risk-averse comments from European Central Bank (ECB) officials could limit the currency pair's downward trend in the near term.

Interest rate hikes in prospect

On Friday, Fed Chairman (FOMC) Jerome Powell reiterated that the ECB would need to maintain its restrictive policy for some time to restore price stability. Powell refrained from hinting at the size of the September rate hike, adding that the committee would continue to monitor the data before deciding on the next policy move. In turn, major indices on Wall Street suffered sharp losses, and the U.S. dollar index gained upward momentum, which weighed heavily on EUR/USD.

Concerns about devaluation of the euro

Over the weekend, several ECB policymakers expressed concern about the depreciation of the euro and its potential negative impact on inflation. "Of course we are watching the exchange rate," ECB policymaker Olli Rehn said, pointing out that it already plays an important role in setting monetary policy. As for the policy outlook, "even if we enter a recession, we have little choice but to continue on the normalization path," ECB Governing Council member Isabel Schnabel said. These comments seem to help the single currency hold its ground for now.

Adaptation of our trading systems

We take the comments of central bank members and adjust our trading systems accordingly.

inside-alternavest.article.information

Hawkish ECB commentary could help euro limit its losses

EUR/USD has recovered after falling towards 0.9900. Markets are expecting a 70% probability of a 75 basis point rate hike by the Fed in September. 

 

Hopeful comments from ECB officials could help the single currency limit its losses.

inside-alternavest.article.writtenBy Massimo Di Santo.
Alternavest Partners GmbH Otto-Heilmann-Str. 17 82031 Gr├╝nwald

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