EUR/USD advances towards 1.1200 ahead of EU’s Unemployment Rate

• EUR/USD marches towards 1.1200 on rising bets over an interest rate hike by the ECB.
• A higher preliminary inflation figure in Germany advocates a rate hike sooner rather than later.
• Other than fuel and food, ECB’s Lagarde sees no other factor compelling a hawkish stance.

The EUR/USD pair has added gains on Thursday after surpassing Tuesday’s high at 1.1171. The shared currency has remained a decent performer in the past few trading sessions amid rising bets over an interest rate hike for the first time since the Covid-19 pandemic.

Soaring inflation in Eurozone is compelling the European Central Bank (ECB)’s policymakers to elevate the interest rate. A preliminary estimate of the German Consumer Price Index (CPI) displays that German annual inflation could climb to 7.3%, the highest print in more than four decades. This advocates an interest rate hike by the ECB sooner rather than later.  

Russia’s invasion of Ukraine has spurred the oil and gasoline prices in Europe due to its higher dependency on Moscow’s oil and energy. ECB’s President Christine Lagarde spoke on the inflation outlook at an event hosted by the Bank of Cyprus on Wednesday, citing that other than fuel and food no other catalyst is indicating inflation. However, food and energy prices should be barricaded now.

Meanwhile, the US dollar index (DXY) has started reacting to the economic indicators after the optimism over the Russia-Ukraine peace talks faded. The DXY has slipped below 98.00 on weak annualized Gross Domestic Product (GDP) (Q4) numbers and Automatic Data Processing (ADP) Employment Change.

Going forward, investors will focus on the European Union (EU)’s Unemployment data, which is likely to land at 6.7% against the previous figure of 6.8% on Thursday. While the US docket will offer Nonfarm payrolls (NFP), which claims a preliminary estimate of 480k against the prior figure of 678k, which is due on Friday.