Eurozone and US Inflation Growth Figures Lower than Forecast to Keep EUR/USD Conversion Rate Bearish Ahead of Fed Rate Decision
Yesterday the Eurozone Consumer Price Index fell short of expectations to clock in at 0.1%, indicating that recent market turmoil has held down inflationary growth and suggesting that the European Central Bank (ECB) may be more inclined to introduce fresh monetary loosening measures to help boost the rate back towards its 2% target. As the US CPI also printed lower than forecast the ‘Greenback’ (USD) saw another surge on speculation that the Fed will not opt to raise interest rates at today’s meeting.
However, this morning the EUR/USD exchange rate has returned to an uptrend in the range of 1.1312.
The common currency (EUR) is experiencing an upturn in optimism this morning in advance of the latest Eurozone CPI, propelling the EUR/USD pairing away from fresh lows.
Single Currency (EUR) Softened by Declining Investor Confidence as ‘Greenback’ (USD) Soared in spite of Contracting US Production
Although the Euro (EUR) had a strong start to the week with an unexpectedly strong printing of the year-on-year Eurozone Industrial Production figure for July, which defied forecasts by showing increased growth of 1.9%, the EUR/USD exchange rate remained generally weighed down. Yesterday’s disappointing showing on the ZEW Economic Sentiment Index, which dipped from 25 to 12.1 last month, compounded traders’ concerns with the indication that German investors have become increasingly pessimistic over the outlook of the Eurozone’s economic powerhouse. While local second quarter employment held steady and the ZEW Current Situation index demonstrated an improvement, the appeal of the single currency remained on the decline throughout the day.
The debate over the likelihood of the Federal Open Market Committee (FOMC) opting to raise interest rates at Thursday’s meeting raged on as the US posted a conclusively dovish raft of data yesterday. Shortfalls abounded on the nation’s Advance Retail Sales and Industrial and Manufacturing Production figures, with a greater contraction in output than forecast suggesting that the domestic economy has suffered as a result of recent global market turmoil. However, the ‘Greenback’ (USD) proved resilient to these disappointments and surged against rivals as pundits appeared to react well to the diminished probability of a September rate hike. Consequently the EUR/USD pairing was pushed to a daily low of 1.1294.
Eurozone Inflation Growth Expected to Hold Steady Today, EUR/USD Conversion Rate Poised to Gain on Solid Data
Ahead of today’s release of the Eurozone and US Consumer Price Indexes for August, the Euro to US Dollar (EUR/USD) conversion rate has entered a slight uptick, with the expectation for core inflation in the currency union to remain static at 1%. However, as polls continue to indicate that former Greek Prime Minister Alexis Tsipras will not be returning to power with a majority, or even potentially at all, the uncertainty of the Hellenic nation’s future in the Eurozone remains a significant weight on investors’ minds. Any decline on this data will likely return the Euro to a general downtrend, as the possibility of monetary loosening from the European Central Bank (ECB) remains on the horizon.
EUR/USD Exchange Rate Forecast: Outcome of September Fed Interest Rate Decision to Greatly Influence ‘Greenback’ Movement
While another weak showing from the US this afternoon could prompt further movement from the ‘Buck’, potentially proving contrary to shore the currency up once again, the greater mover for the EUR/USD conversion rate stands to be the Thursday Fed rate decision. The much-anticipated outcome of the September FOMC meeting will decide the trajectory of the pairing, although a dovish result may ultimately be ‘Greenback’ supportive due to recent doubts with regards to the negative effect a hike could have on the domestic economy.
Current EUR, USD Exchange Rates
At time of writing the Euro to US Dollar (EUR/USD) exchange rate is slumped in the range of 1.1256, with the US Dollar to Euro (USD/EUR) pairing climbing at 0.8882.