Euro US Dollar (EUR/USD) Exchange Rate Trading Sideways amid Risk-Off Mood
The Euro US Dollar (EUR/USD) exchange rate is trading in a narrow range today. Markets may be hesitant to place any major bets ahead of high-impact US inflation data.
The pairing may be finding support from a cautious market mood, as well as hawkish rhetoric from European Central Bank (ECB) President Christine Lagarde.
At time of writing the EUR/USD exchange is at around $1.0954, which is virtually unchanged from this morning’s opening figures.
US Dollar (USD) Subdued as Markets Await Inflation Data
The US Dollar (USD) is seeing limited movement today ahead of key US inflation data later this afternoon. A retreat in global risk appetite may be underpinning the safe-haven ‘Greenback’.
The cautious market mood may conversely be motivated by multiple crisis currently facing the US economy. The possibility of a default in the US debt ceiling is continuing to send ripples throughout global markets. US President Joe Biden agreed to further talks to try and break the deadlock on the issue.
Concerns of fresh instability in the US banking sector may also be weighing on USD today. The concerns come following the collapse of three major regional banks earlier in May.
Finally, bets on a pause in policy tightening from the Federal Reserve in the coming months could be keeping pressure on USD.
Euro (EUR) Treading Water despite Hawkish ECB Comments
The Euro (EUR) is muted today as markets await US inflation data. A risk-off mood may be preventing a downturn in EUR.
Hawkish comments from ECB President Christine Lagarde may be supporting the single currency.
Speaking in an interview with Nikkei, Lagarde hinted that there were still ‘significant upside risks’ to the ECB’s inflation outlook. Lagarde’s comments may be strengthening ECB rate hike bets, which could in turn be lending support to the Euro.
The final reading of Germany’s April inflation figures could also be dampening enthusiasm for EUR today. The reading confirmed that German inflation softened to 7.2% last month.
EUR/USD Exchange Rate Forecast: Will Hawkish Signals from ECB Push Euro Higher?
Looking ahead to the rest of the week for the Euro, speeches from various ECB policymakers could prompt movement in the single currency. Markets will be looking for any hints regarding the central bank’s forward policies. EUR could be pushed higher by any reassurances that interest rates will stay higher for longer.
Amid a sparse data calendar for the single currency, shifts in risk appetite could drive movement in the single currency. The Euro could benefit from the continued economic instability in the US markets.
US inflation data later today could pull the US Dollar lower if it prints as expected. Headline inflation is expected to remain at 5% in April, whilst core inflation is set to tick lower to 5.5%. The figures could also prompt a pullback in Fed rate hike bets which may deepen USD’s losses.
April’s PPI figures could cushion the US Dollar’s potential losses on Thursday, however. The index is expected to have increased by 0.3% last month. The signs of persistently stubborn inflationary pressures could prop up Fed rate hike bets.
Also on Thursday, jobless claims for the week ending May 6 are expected to edge higher to 245,000. The evidence of an increasing softness in the US labour market could cap any gains following the release of the PPI data.
Finally for USD, May’s consumer sentiment is expected to remain close to previous highs on Friday. The continued confidence in the US economy from consumers could bolster the US Dollar.
