The Euro and other higher-risk currencies came under pressure versus the US Dollar after one Federal Reserve Bank voting member suggested that a rate hike was likely by September. The pressure continued for the Euro as a mixed bag of economic data releases hit the newswires this morning. Germany’s PMI figures for July improved, with the services PMI beating estimates; Germany is seen as the main driver of the Euro area’s overall economy. At the same time, the reading for the Eurozone’s PMI Services sector edged higher to 54 in July from the previous 53.8 in June, beating analysts’ estimates. That helped to lift the PMI composite to 53.9, above the 53.7 expected. Eurozone retail sales disappointed, however, dropping significantly to 1.2% (YoY) in July, far off the consensus estimate of a drop to 1.9%.
As reported at 11:32 am (BDT) in London, the EUR/USD was trading at $1.0856, down 0.30%; the EUR/JPY was also lower at 135.1060 Yen, a decline of 0.23%. The EUR/GBP was trading lower at 0.6966 pence, a decline of 0.42%.
Could Fed Surprise?
In terms of the US Dollar, one currency strategist believes that the Fed has wrong footed the markets in the past, so many FX traders will be wary of another instance where there was nothing to back up the rhetoric. Still, the majority of analysts believe that an interest rate increase will very well become a reality in the near future; whether it’s as near as September is still up for debate, however.
