Exchange rates between the US dollar and the euro suffer as the US dollar increases globally
As of Tuesday, the EUR/USD exchange rate was down by 0.4%, with the US Dollar rising as a result of a decline in global risk appetite. Poor industrial statistics in Germany increased concerns about a possible recession, which caused the euro to fall.
Euro Depreciation Driven by Weak German Industrial Figures
Tuesday saw a decline in the value of the euro, which was partially brought on by Germany’s poor industrial production numbers. In contrast to the expected 0.7% reduction, the output fell by 3.1% in December.
ECB policymakers’ conflicting signals put pressure on the euro.
Conflicting opinions among European Central Bank (ECB) policymakers made the situation for the Euro more problematic. On the one hand, Francois Villeroy de Galhau’s comments that the inflation rate in the Eurozone could have peaked increased the pressure on the euro. On the other hand, the hawkish remarks of ECB board member Joachim Nagel, who expressed the opinion that the ECB needs more major rate rises, helped the euro.
Benefits of Safe-Haven Demand in Risk-Off Trade for the US Dollar
Investor preference for safe-haven assets during a risk-off trade led to an improvement in the US dollar. This was partially brought on by the Federal Reserve’s anticipation that interest rates would rise for a longer period of time than initially anticipated, which impacted on the stock markets worldwide and stoked recessionary worries. The latest strong US payroll numbers also helped the US Dollar since they suggested that the Fed will continue to raise rates rather than decrease them in 2023.
German inflation data and ECB speeches have an impact on predictions for the EUR/USD exchange rate.
If the German inflation report on Thursday is in line with expectations, it might help the euro. Further wagers on ECB rate increases may be warranted given the anticipated 8.9% inflation rate in January. Additionally, remarks made by ECB policymakers throughout the week may support the Euro.
On the other side, Wednesday’s talks by a number of Federal Reserve policymakers might boost the value of the US dollar. Following the positive employment report from last week, investors will be watching for signs of future interest rate increases.
Finally, it is anticipated that the claims for the week ending February 4 would be fairly consistent with the figures from the week before.