Forex
Energy Shock Drives EUR/USD Amid ECB Rate Hike Expectations
The EUR/USD exchange rate traded near 1.1600 on Monday after Friday's decline of 0.57% to 1.15830, following Federal Reserve Chair Kevin Warsh's remarks at Jackson Hole.
The German flash HICP for August came in at 2.9%, missing the expected 3.1% and with energy prices rising 10.5% annually, but core inflation remaining flat at 2.4%. This miss had little effect on the EUR/USD rate, which remains near 1.1595.
The ECB deposit rate of 2.25% is facing a near-fully-priced 25bp hike on September 10, as interest rate expectations remain unchanged after the German inflation print.
The energy shock from the Iran conflict and higher crude oil prices is driving headline inflation, with every component the ECB controls either easing or staying flat.