Published on 01.06.2022 10:38

The case for a 50-point basis rate hike in the coming months by the European central bank was bolstered in yesterday’s trading session after the release of the latest Cpi figures from the Eurozone that showed inflation was still running red hot.

Inflation figures yesterday hit the market at 8.1% in May, up from 7.5% and well above analysts’ expectations for a figure of 7.7%. The core inflation figure also came in above expectations at 3.8% vs a consensus of 3.5%

This well and truly keeps the ECB on track to raise interest rates in the 3rd quarter of this year Although, the question for the ECB is whether the bank will go ahead with 25 or 50 basis point hike although at this time most analysts still expect a 25 point move due to the risks such as high energy prices and the ongoing war between Ukraine and Russia

The Euro is now well and truly of its 20 year low of $1.0349 against the US dollar and has benefited tremendously of late as ECB policymakers look set to move away from negative interest rates while inflation rages across the continent. The European currency was also bolstered by comments from Atlanta Fed President Raphael Bostic who opened the door to a potential pause in rate hikes from the US Federal Reserve at the September policy meeting.

As we enter today’s trading session it looks like the Euro has come under pressure against the greenback after a disastrous round of consumer spending data form the Eurozone which just goes to show, that higher interest rates may not be a given as the year unfolds.

The latest retail sales figures from Germany came in a few moments ago at -5.4 against analyst’s expectations for a figure of -2.85 while the yearly figure was also disappointing coming in at -0.4 against a market consensus of -0.38

Looking further ahead today, the main drivers of the EUR/USD currency pair will be a monetary speech from ECB president Christine Lagarde followed by the release of ISM manufacturing figures during the American session.


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