Dollar to gain on Euro

It was a big day in the Eurozone financial world yesterday after central bank chiefs expressed hawkish sentiments at the ECB Forum in Portugal. They highlighted that current policy measures are still not adequately restrictive and now the guessing game is in play who will end their rate hiking cycle first.

 The Federal Reserve are expected to implement two additional interest rate hikes, potentially back-to-back which may mark the end of their rate cycle, but nothing is guaranteed as of yet.

Likewise, although the European Central Bank if analysts are to be believed are planning to raise rates in July, and potentially once more thereafter which may also bring their rate hiking cycle to a conclusion.

According to some analysts, regardless of what happens with interest rates, the greenback will appreciate against the Euro as the year unfolds due to the overall attractiveness as the US as an investment destination.

But in the long term, we should expect a structural appreciation of the Dollar against the Euro because of the greater attractiveness of the US for international capital, due to higher potential growth in the US than in the Eurozone, higher R&D spending and technological investment, and greater amount of funds available for innovation. Said economists at Natixis

Volatility in the EUR/USD currency pair looks set to extend today with the release of the latest inflation figures from Spain and Germany, as well as the Economic Sentiment and the final print of the Consumer Confidence numbers in the Eurozone as a whole.

From the US, market participants will await the latest quarterly GDP figures which will be followed by the Initial Jobless Claims numbers, and pending Home Sales figures. The day will be rounded of with a monetary speech by Atlanta Fed Raphael Bostic.