The EUR/USD pair plunges following an ECB meeting.
The primary currency pair remains in a weakened state this Friday. The current exchange rate for EUR/USD is at 1.0649.
The prominent currency pair faced significant pressure yesterday. This transpired after the European Central Bank conducted a meeting and decided to increase the interest rate by 25 basis points, bringing it to 4.5% per annum. The EUR would have potentially weathered this decision fairly well if not for the comments made by the regulator during the meeting.
The ECB stated that the interest rate had reached a level deemed sufficient in the long run to maintain control over inflation. This suggests the regulator is prepared for a monetary pause, fortifying its position to keep borrowing costs high for as long as needed. The targeted inflation rate remains at 2%.
The market responded with substantial selling pressure. In the initial hours after the decision, the EUR/USD pair plummeted significantly, attempting to stabilize afterwards.
Given this backdrop, US statistics scarcely grabbed attention. The Producer Price Index (PPI) in August surged by 1.6% year-on-year, compared to the previous 0.8% year-on-year. Retail sales in August witnessed a 0.6% month-on-month increase, surpassing economists’ expectations of 0.2% month-on-month. These indicators all signal towards inflation, which raises concerns ahead of the Federal Reserve’s meeting scheduled for the following week.
