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Euro US dollar (EUR/USD) edges higher amid data lull

Sheet of US Dollar bills

Euro US dollar (EUR/USD) strengthens amid data-light morning  

The Euro US dollar (EUR/USD) exchange rate is gaining ground this morning with both US and Eurozone data in short supply.

At the time of writing the EUR/USD exchange rate is trading at $1.0877, up approximately 0.2% from this morning’s opening rate.

US dollar (USD) faces headwinds despite hawkish Fed

The US dollar is on the defensive this morning ahead of the latest US consumer confidence index, despite some hawkish Federal Reserve rhetoric this morning.

In addition to this, investors await an influx of further Fed commentary throughout the day.

Speaking this morning, Fed hawk Neel Kashkari cautioned against monetary loosening, expressing that further evidence of American disinflation would be required before the Fed could take steps towards lowering its base rate.

When asked what conditions would be necessary for the Fed to consider lowering its base rate, Kashkari said:

‘Many more months of positive inflation data, I think, to give me confidence that it’s appropriate to dial back. I’m not seeing the need to hurry and do rate cuts; I think we should take our time and get it right.’

Should Kashkari’s peers echo his hawkish sentiment later in the day, the ‘greenback’ may find strength in waning Fed rate cut bets.

Euro (EUR) subdued amid ECB rate cut bets

The euro (EUR) is mixed this morning amid a lack of notable macroeconomic releases.

With data in short supply, surmounting European Central Bank (ECB) rate cut bets continue to weigh on the common currency.

Amid increasing expectations that the central bank will deliver its first interest rate cut in June, Philip Lane, the ECB’s Chief Economist, has reinforced speculations of imminent monetary loosening.

Lane commented:

‘At our June meeting, if our updated assessment of the inflation outlook, the dynamics of underlying inflation and the strength of monetary policy transmission were to further increase our confidence that inflation is converging to our target in a sustained manner, it would be appropriate to reduce the current level of monetary policy restriction.’

However, a weakening US dollar (USD) amid a shifting market sentiment lends EUR some modest support this morning, due to the currency pairing’s negative correlation.

Euro US dollar exchange rate forecast: US consumer confidence in focus

The latest American CB consumer confidence survey is due for release this afternoon and could impact USD movement.

Economists expect morale to have fallen slightly in May, with the index due to print at 95.9, easing from last month’s 97. Should the data print as forecast, the US dollar may continue to slide against its major rivals amid signs of easing consumer confidence.

Looking to the Eurozone, Germany’s latest GfK consumer confidence index is due for release tomorrow and could act as a key catalyst of EUR movement. The consumer climate index is due to rise slightly to -22.5 up from the previous month’s -24.2. Gradually improving consumer sentiment in the Eurozone’s largest economy may lend EUR some modest support, though a deeply negative reading could prevent the common currency from making any notable progress.