The Euro continued its slide against the US dollar in yesterday’s trading session after the release of CPI figures from the Eurozone once again showed a declining trend for inflation which led to speculation about the amount of further rate hikes the Europe Central bank will deliver as the year unfolds.
The European Union’s statistics agency Eurostat revealed inflation data for January 2023 and the eurozone’s annual inflation rate came in at 8.6% in January which was down from 9.2% in December. The European Union’s annual inflation rate also came in lower at 10%, down from 10.4% in December.
Most eurozone countries saw a decrease in inflation compared to December, but nine countries saw a rise in the consumer price index. Moreover, 12 countries remained in the double digits territory in January.
There is now a clear trend of declining inflation figures in the Eurozone and although there is pretty much a guaranteed 50 basis point rate hike from the ECB expected next month any subsequent rate hikes are now up in the air and will be dictated by the release of economic data.
Also pressuring the Euro was the release of GDP figures from the US where market participants witnessed another strong set of figures as well as another strong employment report.The U.S. Bureau of Economic Statistics said yesterday the second reading of fourth-quarter Gross Domestic Product showed the economy grew 2.7%, slightly below analysts estimates for a figure of 2.7 percent.
The number of Americans filing new claims for unemployment benefits unexpectedly fell last week, pointing to a persistently tight labour market, and further fuelling fears that the Federal Reserve could raise interest rates higher than anticipated.
Initial claims for state unemployment benefits hit the market at 192,000, down from the last reading of 195,000 for the week ended Feb. 18, the Labour Department said. Analysts had been expecting a figure of 200,000.
Looking further ahead today, the main drivers of the EUR/USD currency pair will be the release of the Core Personal Consumption Expenditures Price Index from the US for the month of January as well as the Michigan consumer sediment index and a strong round of numbers should leave the US dollar a solid footing as the trading week closes.