Published on 20.10.2022 09:45

The Euro took a tumble in yesterday’s trading session against the US dollar after the latest round of inflation figures added to the case that a session was likely coming to the Eurozone.

Last months inflation numbers in the Euro area jumped by 1.2% MoM which was what analysts had predicted while the yearly figures hit the market at 9.9 percent which was slightly below expectations

 The readings have increased the likelihood of a third straight 75 bps interest-rate hike by the European Central Bank and several ECB policymakers had recently come out in favour of such a lift to the bank rate, even though last week, the International Monetary Fund (IMF) predicted a recession in the Euro block as we enter 2023 and Germany is expected to bear most of the brunt.

Europe's biggest economy has paid dearly for its heavy reliance on gas from Russia, which cut supplies to Europe in suspected retaliation for Western sanctions over the conflict.

The German economy is now expected to shrink by 0.3 percent in 2023, the IMF said in an update to its World Economic Outlook from July, which had forecast 0.8 percent growth for the country.

Looking further ahead today, the main drivers of the EUR/USD currency pair will be the release of the producer price index from Germany which is a key indicator of business confidence and may well show if the country is headed for a recession.

From the US the market will await the initial jobless claims figures which is an important barometer of the employment market and may help dictate the size of the next rate hike from the US Federal Reserve.


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