Published on 25.05.2022 11:06

The Euro remains well supported against the US dollar as we enter today’s European session after a disastrous round of economic data from the US yesterday sent the alarm bells ringing on the state of the US housing market

US New Home Sales for April marked the biggest monthly fall in nine years hitting the market at - 16.6% against analysts’ expectations for a figure of -3.4% and well below last month’s number of -3.4%

 This has sparked concerns over the growth of the world’s largest economy, especially at the time when inflation fears are mounting, and the news has now thrown into doubt an expected 50 basis point rate hike from the US Federal Reserve next month.

Some analysts now see an outside chance that the Fed will only hike rates by 25 basis points which may be welcoming news for the Euro but not all are convinced, and some believe there are other pressing matters such as energy prices and the ongoing conflict in Ukraine which may limit any further gains in the Euro.

“It is difficult to imagine a significantly more hawkish ECB at present. There are economic uncertainties and risks in the eurozone too which could cause the ECB to act more cautiously, in particular in case we might see an energy crisis. That is why I think that the euro might be unable to rise much further after the market has already adjusted its rate expectations considerably.

The main drivers of the EUR/USD currency pair as the day unfolds will be the release of the GfK sentiment figures and GDP numbers from Germany followed by a speech from ECB President Lagarde which will catch investors’ attention for any further talk of interest rate hikes

In the American session will see the release of the latest US Durable Goods Orders for April and FOMC minutes from the US Federal Reserve where the topic of interest rate hikes will also be on the agenda.


FAQ