Published on 22.04.2022 13:07

The Euro made a complete reversal of fortunes in yesterday’s US trading session and has continued to tumble as we enter today’s European trading session after hawkish comments from US Federal reserve President Jerome Powell put the market on notice about the forthcoming rate hikes expected by the US central bank.

Speaking during an International Monetary Fund panel which was also attended by European Central Bank head Christine Lagarde, Mr Powell said that taming inflation is “absolutely essential.” Which he then followed up by saying “I would say 50 basis points will be on the table for the May meeting,”

Although market participants had begun anticipating a 50-point rate hike in May they didn’t expect the news to come direct from the Fed presidents’ mouth and the possibility of further 50 point rate hikes now remains a distinct possibility.

The news sent the US dollar soaring against all of the major currencies including the Euro as investors took positions in the greenback in anticipation of the higher yields on offer.

“The markets are having to digest a much steeper, a much more accelerated rate path than they thought was the case a week ago, a month ago or three months ago. So I think there still is that adjustment taking place,” said Daniel Morris, chief market strategist at BNP Paribas Asset Management.

There was a mixed bag of news released from the Eurozone earlier this morning but that failed to stop the decline in the EUR/USD currency pair.

The Eurozone Manufacturing purchasing managers index (PMI) hit the market at 55.3 in April vs. analyst’s expectations for a figure of 54.7 and well down on last month’s number of 56.5.

The European Services PMI jumped sharply to 57.7 in April vs. 55.0 expected and up from 55.6 in the previous month and marked an 8-month high.


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