Euro falls to three-month low as hawkish Fed outlook weighs

  • EUR/USD slips to a three-month low as the US Dollar rally gathers strength.
  • Higher energy costs keep inflation risks elevated on both sides of the Atlantic.
  • US PCE inflation and Nonfarm Payrolls remain the main data releases this week.

EUR/USD extends its decline on Tuesday, falling to its lowest level since late June as broad-based US Dollar (USD) strength keeps the Euro (EUR) under pressure. At the time of writing, EUR/USD trades around 1.1331, down 0.35% on the day.

Weaker-than-expected US economic data released on Tuesday did little to dent the US Dollar’s strength, as traders remain focused on the inflationary impact of elevated Oil prices and the resulting hawkish Federal Reserve (Fed) expectations. The US Dollar Index (DXY), which tracks the Greenback against a basket of six major currencies, trades around 101.50, its highest level in two months.

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JOLTS Job Openings fell to 7.079 million in August, below the market forecast of 7.23 million. The previous reading was revised higher to 7.335 million from 7.271 million. The data pointed to some cooling in labour demand, although job openings remain elevated by historical standards.

The Conference Board Consumer Confidence Index also fell to 81.9 in September, missing expectations of 89.0. The August reading was revised lower to 88.6 from 89.4.

According to the CME FedWatch Tool, markets are pricing in around a 68% probability of another interest-rate increase at the Fed’s October meeting, following the 25-basis-point hike delivered earlier this month.

Expectations of higher US interest rates and heightened inflation risks have pushed US Treasury yields to multi-year highs. The benchmark 10-year yield climbs to 5.28%, its highest level since 2007. Higher US yields increase the appeal of Dollar-denominated assets and widen the interest-rate gap between the United States and the Eurozone, adding further pressure on EUR/USD.

Across the Atlantic, traders also expect the European Central Bank (ECB) to raise interest rates further this year. Recent ECB communication suggests that inflation risks remain tilted to the upside because of elevated Oil prices, although policymakers have not seen clear signs of second-round effects. At the same time, higher energy costs pose downside risks to economic growth, leaving the central bank with a difficult policy trade-off.

Attention now turns to the US Personal Consumption Expenditures (PCE) Price Index, ISM Manufacturing Purchasing Managers’ Index (PMI) and Nonfarm Payrolls (NFP) and preliminary Eurozone inflation data for September later this week.

US Dollar Price Today

The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the New Zealand Dollar.

USD EUR GBP JPY CAD AUD NZD CHF
USD 0.35% 0.37% 0.11% 0.15% 0.57% 0.59% 0.36%
EUR -0.35% 0.02% -0.25% -0.22% 0.22% 0.25% 0.00%
GBP -0.37% -0.02% -0.27% -0.21% 0.18% 0.23% -0.02%
JPY -0.11% 0.25% 0.27% 0.05% 0.46% 0.49% 0.25%
CAD -0.15% 0.22% 0.21% -0.05% 0.41% 0.45% 0.21%
AUD -0.57% -0.22% -0.18% -0.46% -0.41% 0.04% -0.21%
NZD -0.59% -0.25% -0.23% -0.49% -0.45% -0.04% -0.23%
CHF -0.36% -0.00% 0.02% -0.25% -0.21% 0.21% 0.23%

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).