Euro down on ECB comments

The Euro fell against the US dollar in today’s trading session as U.S. data showed a mixed picture of the American economy, while the euro was weighed down by cautious comments by a leading European Central Bank hawk.

U.S. consumer spending accelerated in July with an 0.8% increase, but slowing inflation strengthened expectations that the Federal Reserve would keep interest rates unchanged next month. It comes after a string of data this week, including a drop in job openings to the lowest level in nearly 2-1/2 years in July, raised concerns that the economy is slowing.

“The dollar is faring better as today’s data suggests America’s economic glass remains half full .However, the dollar does remain in a hole for the week, and that’s because weaker numbers earlier this week cast doubt on the Fed hiking again.” said Joe Manimbo, senior market analyst at Convera in Washington

Fed funds futures traders see an 89% probability that the U.S. central bank will leave rates unchanged at its September meeting and are pricing in a 44% likelihood of a hike in November, according to the CME Group’s FedWatch Tool.

Friday’s jobs report for August will be scoured for any confirmation that the labour market is weakening. The data is expected to show that employers added 170,000 jobs during the month, according to analysts’ expectations.

The European currency also suffered after ECB rate-setter Isabel Schnabel - considered one of the most hawkish members at the ECB - said euro zone growth was weaker than predicted, but that does not necessarily void the need for more rate hikes.

“We've heard the most influential hawk on the Governing Council take on a much more cautious tone. I think the fact she is flagging downside risks to growth is putting some downside pressure on the euro." said Michael Brown, analyst at Trader X

Data on Thursday showed that Euro zone inflation held steady this month, but underlying price growth fell as expected, a mixed picture that complicates life for the ECB as it weighs the merits of a pause in rate hikes in the face of a visible slowdown in growth. Meanwhile, German unemployment rose more than expected in August, showing the first cracks in what until now had been a very resilient labor market. Money markets are now pricing in a 70% probability that the ECB will leave rates unchanged at its September meeting.