The single currency (EUR) has returned to hawkish form this morning ahead of the upcoming German CPI figures, with the US Dollar (USD) flagging somewhat after slightly mixed data yesterday.
Dovishness from European Central Bank Board Members Undermined Previous EUR/USD Conversion Rate Gains as Euro Weakened
Previously high demand for the common currency (EUR) died off over the last few days as the improving situation on the global stock markets in the wake of Black Monday reversed many of the gains that had been made on risk aversion and panic selling. In part this turnaround was also fuelled by some dovish commentary from European Central Bank (ECB) Executive Board Member Peter Praet on Wednesday, with his suggestion that monetary loosening measures might be imminently in store for the Eurozone reducing the appeal of the currency. As rivals began to retake ground the Euro naturally softened, pulling the EUR/USD exchange rate further away from the six-month high it had reached earlier in the week.
A raft of US data was released yesterday afternoon, including the GDP, Personal Consumption and latest domestic unemployment figures. Although the majority of these economic stats were either as-expected or higher the Pending Home Sales and Continuing Claims both saw significant shortfalls on forecast. With the Dow Jones recovering most of its losses and in spite of the Fed all but writing off the possibility of a September interest rate hike, the strengthening ‘Buck’ (USD) continued to weigh down on the EUR/USD pairing to prevent any significant movement overnight.
Interim Greek Government to be Sworn in Today as Euro (EUR) Waits for Inflation Indication on German CPI
As the stock markets continue to calm today attention can start to return to the matter of Greece, where a new interim government is being sworn in this afternoon to signal the official start of the September election campaign. Former Prime Minister Alexis Tsipras hopes of easily riding back into power with a more supportive, pro-bailout majority appear to be somewhat limited, however, as the latest polls have demonstrated that the popularity of Syriza has distinctly diminished from earlier in the year. This afternoon’s German Consumer Price Index data stands likely to move the Euro though, and potentially eclipse any increased uncertainty now that Greece is moving towards its new government.
More figures for the US are also upcoming today, with the Personal Income and Personal Spending data potentially capable of shoring up the ‘Greenback’. However, after some of yesterday’s disappointments and their impact on the currency the EUR/USD exchange rate has returned to an uptrend this morning.
EUR/USD Exchange Rate Forecast: Eurozone Inflation Figure Crucial as Common Currency Looks to Extend Gains
Monday’s year-on-year Eurozone Core Inflation Rate has a good chance of boosting the single currency further, should it either reach or beat expectations to potentially assuage some of the ECB’s concerns regarding the currency bloc’s ability to meet its 2% inflation target on schedule.
For the ‘Buck’ the Chicago PMI at the beginning of the week is a release to watch, particularly for the indication it will provide for the next day’s US Manufacturing PMI. More strong figures are needed for the US Dollar to continue driving the EUR/USD pairing down and to shake off the lingering effects of Black Monday to return to a truly bullish run.
Current EUR, USD Exchange Rates
At time of writing the Euro to US Dollar (EUR/USD) exchange rate continues to trend positively at 1.1293, while the US Dollar to Euro (USD/EUR) pairing is falling back at 0.8848.