Euro firms on hopes for EU energy price intervention

The euro strengthened on Tuesday, bolstered by reports the EU is preparing to intervene in the energy market to help bring down prices.

Meanwhile, the pound is trading in a wide range so far this morning, with GBP/EUR ticking up to €1.1656 and GBP/USD buoyed at $1.1681. GBP/CAD and GBP/NZD are holding steady at C$1.5271 and NZ$1.8993, respectively, while GBP/AUD has slipped to AU$1.6945.

Coming up, could we see another acceleration in Eurozone inflation push the euro higher again this morning?

What’s been happening?

The euro trended broadly higher yesterday, underpinned by hopes for the EU’s ‘emergency intervention’ on energy prices.

This followed comments from European Commission president Ursula von der Leyen on Monday evening, in which she suggested energy prices could be decoupled from gas prices.

EUR investors hope the intervention could help minimise Eurozone recession risks.

The US dollar initially stumbled on Tuesday, a prevailing risk-on mood sapping the appeal of the safe-haven currency.

However USD exchange rates subsequently rebounded, amid stronger-than-expected US consumer confidence figures.

The pound, meanwhile, remained on the back foot yesterday, Sterling sentiment remaining downbeat in the face of UK recession fears.

Adding to the pressure on GBP exchange rates were concerns over Liz Truss’ economic policies, with analysts still expressing doubts that the frontrunner to replace Boris Johnson will be able to tackle inflation by cutting taxes.

What’s coming up?

Centre stage today will be the Eurozone’s latest inflation release.

August’s preliminary figures are expected to report inflation in the bloc climbed to a new record high in August.

This could see the euro strengthen today as another acceleration in inflation could fuel speculation the European Central Bank (ECB) will pursue a 75 basis point hike next week.

Today will also see the return of the US ADP employment report. The revised report is expected to offer a more robust, high frequency look at the US labour market.

August’s release could set expectations for Friday’s more influential non farm payroll figures, with the US dollar potentially giving ground If they indicate employment growth slowed.

Finally, in the absence of any notable UK economic data, the pound could struggle amid ongoing political and economic uncertainty.