Both hikes the euro was promised arrived, and the pair fell 192 pips. I went back to measure the terms of trade payment I had forecast on 17 August and couldn’t find it. What I found was the dollar.
EUR/USD Eyes 1.1700 as Fed Rate Risk Outweighs the Oil Shock
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Key Points:
- EUR/USD fixed at 1.1460 on 18 September, 1.65% under its 9 September fix, after the ECB’s 10 September hike to 2.50% and the Fed’s 16 September hike to 3.75-4.00%.
- I went looking for the terms of trade payment I forecast in August. It isn’t there. EUR/USD’s weekly beta to Brent runs at most -0.03 in 2026 and zero in 2022, so the 19% rise in Brent from 9 to 15 September bought half a point of the 1.65% the euro lost.
- In 2022 the euro fell 15.1% against the dollar and 4.0% against the world. A third of the fall was the differential. Most of the rest was the dollar.