Euro Slides to Yearly Lows as Strong US Data Fuels Dollar Rally
The US Dollar continues its impressive rally against the Euro, driven by strong fundamentals and rising expectations of further Federal Reserve rate hikes. The EUR/USD pair has fallen to a yearly low at 1.1324, with a 2.4% monthly decline in September.
US Treasury yields remain high, supporting the Dollar's surge, while economic data from the Eurozone failed to provide any significant boost to the common currency. The Conference Board's Consumer Confidence Index showed a deterioration in September, while industrial and services sentiment improved slightly.
Eurozone policymakers are aware of the challenges facing the economy, with European Central Bank board member Peter Kazimir stating that a rate hike in September was unavoidable but called for more flexibility in monetary policy. Strategists at OCBC predict a moderate USD rally into year-end, despite cautioning that markets are pricing four Fed rate hikes over the next year, which they deem 'overly aggressive unless demand-driven inflation re-emerges as the dominant force behind price pressures.'