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Euro US Dollar (EUR/USD) Exchange Rate Edges Higher on Strong Eurozone Factory Data

A US Dollar bill.

EUR/USD Exchange Rate Rises as Eurozone Industrial Output Beats Forecasts

The Euro US Dollar (EUR/USD) exchange rate rose today following the publication of the latest Eurozone industrial production data for April, which beat forecasts and rose by 0.8% month-on-month. The pairing is currently trading around $1.21.

As a result, EUR has benefited from growing confidence in the Eurozone’s economic recovery.

Josie Dent, managing economist at CEBR, commented on the latest Eurozone factor data:

‘Today’s Eurozone industrial output growth of 0.8% in April beats expectations of a 0.4% monthly expansion.

‘This is an encouraging sign of recovery as vaccinations pick up pace and restrictions ease. CEBR expects 4.3% Eurozone GDP growth in 2021.’

Peter Vanden Houte and Carsten Brzeski, analyst at ING, were also optimistic about Europe’s economy, saying:

‘With the accelerated reopening of the economy, the eurozone is heading for a strong upturn. While price increases are grabbing headlines, core inflation remains subdued. Although the European Central Bank is in wait-and-see mode, we think the PEPP is unlikely to be lengthened beyond March 2022, but too strong a drop in bond purchases will be avoided.’

EUR traders are looking ahead to further comments from the European Central Bank (ECB), however, following the bank’s dovish comments later last week.

US Dollar (USD) Exchange Rate Dips Despite Risk-Off Market Mood

The US Dollar (USD) dipped against the Euro today despite risk-off market mood buoying demand for the safe-haven ‘Greenback’.

Tensions between the US and China have sparked concern about the global economy, with investors now more hesitant to invest in risky assets.

Relations between the world’s two largest economies have deteriorated during the course of the G7 summit in Cornwall, UK.

In US economic news, today saw the release of the latest US consumer inflation expectations data, which rose by 3.4%.

This was not enough to spark concerns about the US economy, however, having little effect on the USD/EUR exchange rate.

Instead, USD investors rate awaiting Wednesday’s Federal Reserve interest rate decision.

Analysts at ING explain:

‘The Fed is expected to leave policy unchanged and again play down taper talk. Nonetheless, markets will be looking for hints on whether the Fed is starting to acknowledge that inflation may not be as transitory as thought. A technical adjustment to address the rapid build-up in excess liquidity is certainly possible, but dollar downside risks remain.’

EUR/USD Exchange Rate Forecast: Could a Bullish Fed Improve Risk Sentiment?

The US Dollar (USD) will continue to be driven by speculation over the Federal Reserve’s approach to rising inflation levels this week.

However, if the Fed announces confidence in the US economy, then demand for the ‘Greenback’ could slip as risk sentiment improves.

Euro traders will be looking ahead to tomorrow’s release of Germany’s latest inflation gauge.

If the outlook for the Eurozone economy continues to improve, then the EUR/USD exchange rate will head higher.