The euro fell against the US dollar on Wednesday as investors looked toward incoming market and inflation data in an effort to uncover clues as to the path that the European Central Bank (ECB) and the Federal Reserve will take with regard to their interest rate policies.
Spain reported that its consumer prices rose 2.6% year-on-year in August, up from 2.3% in July. This fell directly in line with analysts’ predictions. German state North Rhine-Westphalia (NRW) saw a 5.9% year-on-year rise in inflation, up from 5.8% in July and signifying that the ECB may not bring an end to its interest rate hikes anytime soon.
Money markets are pricing a 60% chance of the ECB hiking rates by 25 basis points in September. “A September hike at this stage could be more of a coin toss, but more importantly, we sense that the hawks will see it as a last chance to hike one final time,” Benjamin Schroeder, a senior rates strategist at ING observed.