Euro Struggles Against Strong US Dollar Amid Rising Yields and Hawkish Fed Expectations
The Euro continues to struggle against the US Dollar despite softer-than-expected ADP data. The EUR/USD pair trades around 1.1580, down -0.11% on the day.
US Treasury yields eased across the curve on Wednesday but remain close to recent highs, with the benchmark 10-year yield trading around 4.78%. New York Fed President John Williams attributed rising yields to a strong economy and outlook, noting a correlation between bond yields and the Middle East conflict.
The broader outlook favors the Greenback as traders increase bets that the Federal Reserve could raise interest rates as soon as September. The probability of a rate hike at the September 15-16 meeting stands at around 70%, up from 36% a week ago, according to the CME FedWatch tool.
Escalating tensions in the Middle East are supporting the Greenback and weighing on the Euro. The European Central Bank is expected to raise its deposit rate by 25 basis points to 2.50% at its September 9-10 meeting, following preliminary Eurozone inflation data that showed the Harmonized Index of Consumer Prices (HICP) accelerated to 3.3% YoY.