Euro pull back from 1.12

The Euro is coming under further pressure against the US dollar as we get ready to enter today’s European trading session which takes the run of losses to 4 days after the release of strong jobs data from the US all but guarantees a rate hike from the US Federal Reserve this month.

The number of Americans filing for unemployment insurance fell by 9K, to 228K during the week ended July 15, marking the lowest reading since the middle of May which points to a resilient labour market and reaffirmed market bets for a 25-basis point rate-hike by the Federal Reserve in July.

Better than expected consumer confidence figures failed to boost the Euro which increased more than expected in July, an encouraging sign for the 20-nation currency bloc. The reading of -15.1, which was above the -16.1 in June and above analysts’ expectations for a figure of -15.8. The European Commission said improvement shows that the gauge is slowly but steadily recovering toward its long-term average. The data come hours after revised Eurostat numbers revealed that the region avoided a winter recession after all.

Looking ahead for the Euro, one of the biggest risks is rate hike expectations which seem to be dwindling by the day and ECB Governing Council member Klass Knot noted earlier in the week that a hike in September is not guaranteed which may bring an end to the European central bank’s current rate hiking cycle.

Knot, a leading hawk on the council, also claims Eurozone inflation will fall back to the 2.0% target in 2024 in a signal the ECB might be preparing the market for a pause in September.

If confirmed in next week's ECB meeting, the Euro could come under pressure as the September hike is priced out.