EURUSD: Euro Fell Against the Dollar Despite High Euro Inflation

The EURUSD currency pair was trading down over 61 pips as the US dollar rallied against the euro. The move comes despite the euro area inflation print released today beating analysts' expectations and underscoring the need for more rate hikes from the European Central Bank.

Investors now expect the ECB to keep hiking rates at its subsequent meetings after the eurozone core inflation print rose to 5.6% beating analysts' expectations of 5.3%. At the same time, the annualised headline CPI print also rose to 8.5% versus consensus estimates of 8.2%.

The monthly inflation rate in the eurozone rose 0.8%, marking a significant jump from the previous figure of -0.2%. However, the high inflation figures did not boost the euro against the US dollar, which remained more robust than other leading currencies. 

The release of the minutes of the last ECB monetary policy meeting also indicated that ECB policymakers were ready to keep hiking interest rates to cool off the record inflation levels witnessed in the region over the past few months. 

Comments from ECB Governor Christine Largade also emphasised the importance of a 50 basis point rate hike to combating the high inflation in most eurozone countries. Therefore, it became clear to investors that a 50 bps rate hike was on the cards during the ECB’s march policy meeting.

However, the hawkish comments from the Federal Reserve policymakers in the past few weeks have confirmed that the Fed will keep hiking rates, which means that the United States will stay ahead of its peers in terms of interest rates, which explains the dollar’s dominance. 

Today, the US dollar’s gains were also attributed to the positive US initial jobless claims data released in the American session. The country recorded 190,000 new jobless claims, much lower than the expected 196,000.  

The EURUSD currency pair is trading above a crucial support zone and investors are interested in seeing whether it shall bounce off the level or break below it over the coming days. Only time will tell, but there is an ongoing struggle between the bulls and bears. 

*This is not investment advice. 

The EURUSD price chart.

The EURUSD currency pair was trading down 61.1 pips (0.57%) as the dollar gained against the single currency.