Euro bolstered by hawkish ECB comments

Philip McHugh September 16th 2022 - 2 minute read

The euro strengthened on Thursday, as EUR investors welcomed some hawkish comments from a European Central Bank (ECB) policymaker.

Meanwhile, the pound is off to a poor start so far this morning, with GBP/EUR dipping to €1.1429 and GBP/USD retreating to $1.1522. GBP/CAD is subdued at C$1.5143, while GBP/AUD and GBP/NZD slump to AU$1.7044 and NZ$1.9128, respectively.

Coming up, will an upbeat US consumer sentiment index bolster the US dollar later today?

What’s been happening?

The euro enjoyed strong support through yesterday’s session following comments from ECB Vice President Luis de Guindos.

De Guindos suggested the ECB should prioritise tackling inflation over sustaining growth and that ‘determined action is essential’ to avoid price growth from becoming entrenched.

The comments helped to bolster bets that the ECB will sustain its current pace of monetary tightening and deliver another 75bps interest rate hike in October.

The US dollar also ticked up yesterday, supported by stronger-than-expected retail sales figures.

However these gains were tempered somewhat by the subsequent release of the latest US industrial production figures, after they reported a surprise slump in factory output last month.

The pound, meanwhile, was placed on the defensive on Thursday, with a gloomy market mood and fresh Brexit jitters leaving Sterling struggling to find support.

What’s coming up?

Kicking off today’s session was the publication of the UK’s latest retail sales release.

August’s figures are likely to see the pound extend its losses today, after reporting a larger-than-expected contraction in sales growth, reviving fears over consumer spending and the threat of UK recession.

This morning also sees the publication of the Eurozone’s latest inflation release.

If August’s finalised figures confirm inflation climbed to a record high last month it could underpin ECB rate hike bets and boost the euro.

For USD investors the focus will be on the University of Michigan’s latest US consumer sentiment index.

Expect to see the US dollar to close the week on a positive note if consumer morale continued to improve this month.

Written by
Philip McHugh

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