Published on 16.11.2021 11:36

The Euro hit its lowest level against the US dollar in yesterday’s trading session on the back of more negative comments from the ECB head and better than expected data from the US maintained expectations of a rate hike from the US Federal Reserve as we enter the new year.

During a meeting of the European Parliament's Committee on Economic and Monetary Affairs yesterday, ECB President Christine Lagarde reiterated here view that the ECB continues to expect inflation to remain below target in the medium-term and "very unlikely " to warrant any rate hikes from the central bank.

"At a time when purchasing power is already being squeezed by higher energy and fuel bills, an undue tightening of financing conditions is not desirable, and would represent an unwarranted headwind for the recovery," Lagarde said.

We are also seeing a sudden rise in the number of coronavirus cases throughout Europe and countries such as Austria, and the Netherlands, have reentered into a partial lockdown to grapple with the crisis.

With all this in mind, it looks like interest rates will remain on hold in the Eurozone until at least 2023 which is in stark contrast to the US Federal Reserve who are due to hike rates as early as the 1st quarter of next year.

These expectations were backed up after the release of the NY Fed Manufacturing survey for November which rose to 30.9 against expectations for a figure of 21.6 and well up from last month’s number of 19.8.

Looking ahead today, the key drivers of the EUR/USD currency pair will be the release of GDP figures from the Eurozone and during the American session, the latest retail sales figures from the US which are once again, expected to come in strongly.

As we enter today’s trading session, the Euro has broken below a few key areas of support on its way down, including the 1.1420 mark and the all-important psychological level of 1.1400 just below it.
 
The next area of support is the $1.1350 mark, and this may be tested as we head into the release of the GDP figures from the Eurozone in a few hours’ time.

The main news will be the retail sales figures from the US and the Euro bulls will be hoping for a disappointing reading which may be the only thing that will save the European currency from hitting a new 14 month low.


FAQ