Published on 01.08.2022 16:55

The Euro has managed to claw out some hard fought gains against the US dollar over the last few days but enters the new week on a firmer footing and may continue to climb in the weeks ahead if the single currency navigates successfully through a wave of U.S. economic data risks.

At the begging of last week, the Euro came under pressure across the board amid an intense market focus on falling European gas supplies that pushed prices higher briefly and led the European Union to agree to a rationing plan that may leave many households and businesses in the cold this winter.

Towards the end of the week the Euro losses were limited by a Dollar that sold off in the wake of Wednesday’s Federal Reserve decision and the following monetary press conference where there were signs that Fed board members were getting nervous about the speed of current rate hikes.

“After the Fed signaled that the pace of rate hikes is likely to slow going forward and has made future policy decisions more data dependent, we decided that the risk reward balance of remaining long USDs in the near-term was not as favourable,” says Lee Hardman, a currency analyst at MUFG.

The Dollar’s pullback to last week’s Federal Reserve decision suggests that institutional clients are taking profits and walking away from an earlier bets against the Euro, which had fallen briefly below parity with the greenback during the middle stage of July.

“While we do not expect the USD sell-off to prove sustainable, we prefer to cut back long USD exposure until the dust settles. The euro-zone economic data releases have also been more supportive than expected for the euro over the past week” Mr Hardman added.

In another sign of good fortunes, the Euro was able to brush of a round of positive data released earlier today from the US to keep its mini rally intact.

 The US ISM Manufacturing PMI hit the market at 52.8, higher than the analysts expectations for a figure of 52.0 although it was less than the previous month’s figure of 53.


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