EUR/USD has bounced up to 1.1460 but remains about 0.9% down on the week.
The US Dollar is pulling back from recent highs in thin-volume trading
Rising hopes of Fed rate hikes are likely to keep US Dollar dips limited.
The Euro (EUR) trades practically flat against the US Dollar (USD) on Friday, changing hands at 1.1460 after bouncing up from three-month lows at 1.1420. The pair, however, remains on track for a 0.9% weekly decline, as rising bets of Federal Reserve (Fed) rate hikes have sent the US Dollar surging across the board.
US Dollar bulls are taking a breather amid the Juneteenth bank Holiday in the US. The Euro seems unable to take off from recent lows despite investors’ enthusiasm about the US-Iran peace deal and the decline in Oil prices. The market sees that lower energy prices will ease pressure on the European Central Bank to keep hiking rates, while, in the US, the Federal Reserve’s (Fed) hawkish stance has underpinned support for the Greenback.
Rising Fed tightening bets are boosting the USD
The Fed left interest rates on hold earlier this week, with the interest rate projections showing that nearly half of the committee members anticipate at least one rate hike this year. Beyond that, the new Chairman, Kevin Warsh, confirmed his commitment to bring inflation to target, altogether boosting bets of some monetary tightening later this year.
In the macroeconomic front, US data has continued showing resilience in the face of the Middle East conflict. Data released earlier this week showed that US Retail Sales rose beyond expectations in May, and the Philadelphia Fed Manufacturing Survey highlighted a strong recovery in June.
In the Eurozone, the German Producer Prices Index (PPI) showed a 2.2% yearly growth in May, above the previous month’s 1.7% year-on-year increase but below the 2.5% expected reading. The monthly increase slowed down to 0.3% from 1.2% in April, suggesting that the impact from the energy shock might be wearing off.
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