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EUR/USD exchange rate touches fresh two-week high

Sheet of US Dollar bills

EUR/USD exchange rate subdued ahead of high-impact US data

The euro US dollar (EUR/USD) exchange rate is trading mostly flat this morning, however, has reached a new two-week high.

At the time of writing, the EUR/USD exchange rate is trading at around €1.0734, virtually unchanged from this morning’s opening rate.

Euro (EUR) flat amid absence of data

The euro (EUR) is struggling to catch bids this morning amid a significant lack of any Eurozone economic data releases.

As such, investors likely reflect on a slew of European Central Bank (ECB) speeches delivered this week amid ongoing speculation on the ECB’s monetary policy divergence.

Yesterday, ECB official Madis Muller delivered some hawkish remarks, and implied that markets have priced in too many interest rate cuts for this year.

Speaking to Econostream in an interview on Thursday, Muller explained:

‘That’s why it’s reasonable to start with a 25 bp cut in June, and thereafter to see how actual developments look in terms of inflation, growth and all the other key variables before taking our next decision based on these. Especially as we are starting with rate cuts while inflation is still above our target.’

However, despite this recently hawkish narrative, euro exchange rates have struggled to catch bids and have remained mostly rangebound in today’s European session.

Likely preventing the common currency from posting any further gains is a cautiously upbeat market mood. On the back of its position as a safe-haven currency, positive trading conditions usually serve to undermine the euro.

US dollar (USD) muted ahead of core PCE price index

The US dollar (USD) is trading mostly flat this morning as USD investors likely hold of placing any overly aggressive bets ahead of the latest domestic core PCE price index, scheduled for release later this afternoon.

As the core index is the Federal Reserve’s primary gauge on inflation, investors will also eye up the upcoming data for any signs that may impact the Fed’s forward guidance surrounding monetary policy.

The data is forecast to slightly cool, expected to decrease from 2.8% to 2.6% for March’s reading.

The CME FedWatch Tool is currently showing that markets are now pricing in an over 80% probability the central bank will leave rates unchanged in June.

Should the index deviate from forecasts and cool more than expected towards the central bank’s 2% target, this could see USD exchange rates slump.

EUR/USD forecast: Eurozone data to drive movement?

Looking ahead, the primary catalyst of movement for the euro US dollar exchange rate at the start of next week will likely be several data releases from the Eurozone.

On Monday, the Eurozone’s latest economic sentiment index is forecast to slightly tick up in April, which could underpin the single currency at the start of the week.

The final consumer confidence index for the Eurozone is also scheduled for release on Monday, and is forecast to confirm that the index also marginally increased, which may further support EUR exchange rates.

Turning to the US dollar, a data-light start to the week may see the ‘greenback’ begin the week fluctuating, as markets will likely continue to digest the upcoming core PCE price index, expected later today.