Published on 07.02.2023 18:00

The Euro is once again suffering at the hands of the greenback in today’s trading session which began with the release of last Fridays bumper jobs report from the US which quashed any beliefs that the US Federal Reserve was done with their rate hiking program.

This is now in contrast to the European Central bank and comments today from ECB Governing Council member Francois Villeroy de Galhau who noted today that the improved economic situation in Eurozone makes it easy to fight inflation with monetary policy.

“I don’t think we have to choose between fighting inflation and avoiding a recession,” while adding that he believed that Eurozone was not very far from the peak of inflation which would obviously cause the ECB to carefully consider any further rate hikes.

Data released earlier today from Germany, Europe’s largest economy may have added to the case for a rethink in rate hikes as it is another sign that the European economy is struggling with higher borrowing costs.

Industrial production figures from |Germany hit the market at -3.9 percent, almost double the figure of 0.2 percent expected by analysts and marks the 2nd straight month of rapid decline.

Looking further ahead today, the main driver of the EUR/USD currency pair will be a monetary speech by US Federal reserve president Jerome Powell where no doubt the question of further interest rate hikes will be on the table.

Powell's speech will come before the Economic Club of Washington and will be closely monitored after a strong jobs report last week stymied rising hopes of less aggressive monetary policy.

"A strengthening labour market theoretically makes it less likely that the Federal Reserve will halt interest rate rises anytime soon," said Russ Mould, investment director at AJ Bell.

"The Fed needs to see both the jobs market and inflation start to cool before it can justify changing its stance on rates." He added.


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