Published on 27.09.2022 16:50

The Euro received a bout of good news in today’s trading session after an ECB board member noted that the European central bank was incorrect with regards to inflation timing and admitted that higher prices will be around for much longer.

European Central Bank (ECB) Governing Council member Mario Centeno acknowledged that much has changed over the past year and all signs point to record inflation levels continuing which means more rate hikes are in store from the ECB as the year closes out/

"Inflation will be higher and less temporary than I thought one year ago. We are facing an overlapped succession of shocks that have changed the context in a significant way," Mr Centeno said.

Any positive news for the Euro however is unlikely to limit the strength of the US dollar which has pushed nearly all G10 currenciesto historic lows in recent months.

Economists at ANZ Bank predict the pace and speed of tightening monetary policy among major central banks are biased towards US dollar dominance in 2022 and the first half 2023 as it is thought the US Federal Reserve will be more aggressive with their rate hiking cycle.

“In the near-term, with real yields deeply negative, we see little prospect for any immediate relief from USD strength. On this basis, we expect to see the USD overshoot from fair value in response to monetary policy tightening.” They said

“The US dollar will continue to attract safe haven bids as we expect global recessionary fears to deepen in the coming months. In line with our stronger US dollar view, the US Dollar Index (DXY) will likely peak at 115 in the first half of 2023.” They added.

Looking further ahead today, the main driver of the EUR/USD currency pair will be the release of the latest durable goods orders figures from the US which is a key indicator of consumer spending.

A strong reading will boost the case for further rate hikes from the Fed and it may entice them to deliver another bumper rate rise such as the 75 basis point hike delivered earlier this month


FAQ