EUR/USD Surges as US Dollar Weakness Continues Amid Inflation Concerns
The EUR/USD exchange rate has risen to near 1.1610 amid weakness in the US Dollar. The decline of the USD is attributed to multiple headwinds, including weak US ADP Employment Change data for August and concerns about upside inflation risks.
According to Brown Brothers Harriman's Elias Haddad, labor demand remains unimpressive, with the economy adding only +38k private sector jobs in August, down from +46k in July. Haddad notes that 'the correlation between monthly change in ADP private payrolls and nonfarm payrolls (NFP) is weak,' limiting the extent to which investors can extrapolate the ADP miss into Friday's official employment report.
However, New York Fed Bank President John Williams' comments on Wednesday have eased fears of high inflation expectations. He stated that 'inflation expectations are contained', and 'recent data on price pressures has been encouraging.' This is in line with earlier remarks from Fed Chairman Kevin Warsh at the Jackson Hole Symposium.
The European Central Bank (ECB) is expected to raise its deposit rate by 25 basis points (bps) to 2.50% in the monetary policy announcement on September 10, according to a Reuters poll of all 65 economists surveyed.