The Euro is headed for its 6th straight day of losses against the US dollar, hitting a 6 week low after a strong round of data out of the US yesterday led to speculation the US Federal Reserve will need to keep rates higher for longer in order to bring prices down.
Figures out yesterday showed that U.S. single-family home building surged in July and permits for future construction rose, while a separate report revealed production at U.S. factories unexpectedly rebounded last month.
"We've got the U.S. staying really resilient still, under the weight of high interest rates," said Carol Kong, a currency strategist at Commonwealth Bank of Australia (CBA).
"Even though inflation has come down a long way, it is still some way away from (the Fed's) 2% target, so I think the FOMC will have to be patient and maintain monetary policy at a restrictive level in order to win that last mile against inflation." She added.
Minutes of the Fed's July policy meeting showed officials were divided over the need for more rate hikes last month, citing the risks to the economy if rates were pushed too far but also noted that further rate hikes were not off the table and this will depend on the economic data moving forward.
There was a little bright spot for the European economy yesterday as industrial sector rebounded in June, giving overall growth a small boost to end an otherwise weak quarter on a positive note, data from Eurostat showed on Wednesday.
Industrial production in the 20 nations sharing the euro expanded by 0.5% on the month, beating expectations for a 0.2% rise, while gross domestic product was up 0.3% in the second quarter, unchanged on preliminary data, the EU's statistics agency said.
But overall, the euro zone economy has broadly stagnated for the past three quarters, weighed down by a manufacturing recession and high costs for food and energy, with services and employment providing the few bright spots.
Looking further ahead today, the main drivers of the EUR/USD currency pair will be the release of trade balance figures from the Eurozone as a whole followed by key employment data from the US when the initial jobless claims figures hit the market which may cause some movement in the currency pair.