Euro US Dollar (EUR/USD) Exchange Rate Rangebound Ahead of US Core Inflation
The Euro US Dollar (EUR/USD) exchange rate is trading sideways today, as investors await the afternoon’s US data.
At the time of writing, EUR/USD is trading at around US$1.0557, showing little movement from the morning’s opening rates.
US Dollar (USD) Quiet Ahead of Core PCE Data
The US Dollar (USD) is trading quietly today, as investors await the latest core PCE price index data, due this afternoon.
With a cooldown expected in the Federal Reserve’s preferred inflation gauge, investors appear hesitant to place any bets.
Additionally, the ‘Greenback’ may have crept into overbought territory, restricting its movements. While yesterday’s GDP data smashed forecasts, jobless claims edged back into the 210,000 area.
Francesco Pesole, FX Strategist at ING, commented:
‘There is also a building trend for the dollar to find less and less upward momentum after some strong releases. That is consistent with the overbought condition of the greenback and the notion that we might be close to the peak in US activity data optimism.’
Additionally, a tentatively upbeat market mood could be serving to further weigh down the US Dollar. As a safe-haven currency, bullish trade tends to undermine USD exchange rates.
Euro (EUR) In Flux post ECB Pause
The Euro (EUR) is wavering against most peers this morning, as yesterday’s European Central Bank (ECB) conference continues to sap sentiment.
The bank ended its 10-month tightening cycle yesterday, holding interest rates at 4.5%. Additionally, ECB President Christine Lagarde shied away from offering forward guidance, keeping the focus on the Eurozone economy.
The bank’s forecasts have grown more downbeat in recent weeks, as high interest rates continue to bear down on the bloc’s economy. With this in mind, investors no longer anticipate any further rate hikes from the ECB.
Francesco Pesole, FX Strategist at ING Think, explained:
‘It is clear now that the euro will not be able to draw any substantial benefit from a more hawkish ECB, and markets have all the reasons to keep rate expectations depressed on the back of the deteriorating growth outlook.’
Euro US Dollar Exchange Rate Forecast: German Inflation Cooldown to Dent EUR?
Looking to next week for the Euro, the core catalyst of movement is likely to be Monday’s release of the latest German inflation data.
October’s reading is forecast by economists to have cooled sharply, dropping to 4% down from 4.5%. If this prints in line with expectations, it may prompt EUR investors to further pare back their bets on future tightening, weakening the common currency.
This is then followed by the Eurozone’s latest GDP data, due to print on Tuesday. The bloc’s economy is forecast to have contracted by 0.1% in Q3 on a quarterly basis, which could dent EUR.
With the bloc’s outlook already souring, further news could severely hamper sentiment towards the Euro.
For the US Dollar, the data calendar looks relatively light at the start of next week’s session. Because of this, the ‘Greenback’ may need to rely on bearish trading conditions to strengthen.