Euro under continued pressure

The euro is falling by 0.2% today against the US dollar, after reaching its highest level in three weeks at 1.08953 early this morning.

The continued pressure on the euro today comes with the slightly stronger than expected reading of the US weekly unemployment claims, which does not appear to have changed the markets’ current expectations about the next steps of the Federal Reserve, while it appears that they were looking forward to bigger surprises from the labour market, and this may justify the dollar’s gains.

Last week recorded 222 thousand claims, which was slightly higher than 219 thousand and a reflection of the previous revised reading, the highest since last November at 232 thousand.

While today’s numbers came after inflation slowed last April to 3.4% on an annual basis, which led to a slight improvement in sentiment about the possibility of the Fed starting to cut interest rates next September, and this is what today’s figures apparently did not do, according to the numbers provided. From CME FedWatch Tool.

Current expectations still indicate the probability of a 25-basis point cut by 51.3% and 43% next September and November, respectively, compared to a probability of 29.5% and 18.6% for keeping the current rates unchanged.

Earlier today we also saw the Financial Stability Review (FSR) report released by the European Central Bank (ECB). While the report emphasized the continued safety of financial institutions, the labour market, and families in the face of difficult credit conditions, and that the risks of recession in the short term have become excluded.

However, FSR pointed out that assets are “priced-for-perfection,” which makes the markets vulnerable to high fluctuations as a result of emergency circumstances, especially those of geopolitical origin.