Forecast-beating Industrial Production Leaves EUR/USD Exchange Rate Steady
The Euro (EUR) has traded tightly against the US Dollar (USD) today, but remains near the best level since early October at an interbank exchange rate of $1.1583.
This consistently stable performance from the Euro follows the news that Eurozone industrial production has risen by more than expected during August.
The monthly and yearly readings both showed above-forecast growth, lifting industrial output levels out of previously negative ranges.
German Inflation Rate Figures Confirm Price Growth above ECB’s Target
In other Eurozone news today, it has been confirmed that German inflation rates rose during September.
The finalised figures showed that base and core year-on-year inflation rose above 2%, which puts it over the European Central Bank (ECB) target.
Given the size of Germany’s economy, this result could raise Eurozone-wide inflation and increase the likelihood of an ECB interest rate hike.
Above-target inflation puts more pressure on ECB policymakers to act and raise interest rates, which should encourage consumers to save instead of spend.
US Dollar to Euro (USD/EUR) Exchange Rate Static after Inflation Rate Slowdown
Yesterday’s US inflation rate data has limited US Dollar (USD) demand today, leading to tight trading against the Euro (EUR).
September’s US inflation rate figures showed a slowdown in levels of base inflation, alongside no major change in core inflation rates.
While the results still left year-on-year inflation above the Federal Reserve’s 2% target, the reported slowdowns were larger-than-expected.
As with the European Central Bank (ECB), if inflation exceeds the Fed’s target range then a future interest rate hike is more likely.
A fourth Fed rate hike is expected this year, followed by potentially three or four in 2019.
Lower inflation makes more Fed rate hikes in 2019 less likely, which accounts for limited US dollar demand today.
EUR/USD Forecast: Will Euro to US Dollar Exchange Rate Slide on US Consumer Confidence Reading?
This week’s last Eurozone data is now out, but the EUR/USD exchange rate could still be affected by this afternoon’s US consumer confidence reading.
The University of Michigan’s initial confidence reading for October is expected to show a slight increase from 100.1 points to 100.4, which could boost the US Dollar.
While minor, such a rise would still represent a move away from the sub-100 point contraction range and show a majority of positive respondents.
Looking beyond this week, the EUR/USD exchange rate could see additional movement on the coming Monday’s US retail sales figures.
Readings for September are expected to show an acceleration in the pace of monthly sales activity but a slight slowdown for the year-on-year result.
While slower yearly sales growth is usually a negative factor, a forecast-matching slowdown from 6.6% growth to 5.2% would still be a strong sales reading.
As such, if Monday’s US sales data prints as predicted then the US Dollar could appreciate and make early-week gains against the Euro.