EUR/USD Exchange Rate Rangebound, Souring Risk Sentiment Drives-Up Single Currency
The Euro US Dollar (EUR/USD) exchange rate held steady today following the release of July’s Eurozone inflation gauge, which picked up to 2.2% from June’s 1.9%. The pairing is currently trading around $1.17.
However, the European Central Bank (ECB) has predicted further rises in inflation in the months head.
Analysts at Reuters said:
‘Supporting the ECB’s stance, underlying price pressures remained muted, with a core indicator excluding volatile food and fuel prices at 0.9% on an annual basis, the same as in June, Eurostat data showed, confirming the previous reading published in late July.’
Jack Allen-Reynolds, senior European economist at Capital Economics, also commented on the Eurozone’s inflation data:
‘Global supply problems have not pushed up goods prices dramatically, and ‘re-opening inflation’ has been limited so far.’
Growing concerns about rising Covid-19 rates in Europe, however, has dampened investor demand for the single currency.
Nevertheless, with cases rising in China and New Zealand, demand for the safe-haven Euro has stabilised the EUR/GBP exchange rate.
US Dollar (USD) Exchange Rate Rangebound Ahead of US Federal Reserve Policy Meeting Minutes
The US Dollar (USD) held steady against the Euro today ahead of the release of the US Federal Reserve’s policy meeting minutes.
Any indications about tapering would influence the USD/EUR exchange rate. But if the minutes are notably dovish, then the minutes would be USD-negative.
Analysts at Reuters commented:
‘Analysts expect the Fed to announce its plan for a “taper” of its asset purchases as early as the Sept. 21-22 meeting of the policy-setting Federal Open Market Committee (FOMC), with less certainty about how fast the actually reduction in the bond-buying program will proceed.
‘Fed Chair Jerome Powell may provide information as well in remarks to the central bank’s annual research conference in Jackson Hole, Wyoming, next week.’
Demand for the safe-haven ‘Greenback’ has also risen because of growing concerns for the global economy.
With Covid-19 infections rising in places like China – the world’s second-largest economy – the appeal of the US Dollar has increased.
EUR/USD Exchange Rate Forecast: US Jobs Data in Focus
US Dollar (USD) traders will be eyeing Thursday’s release of the latest US initial jobless claims for the week ending 14 August.
Could falling levels of unemployment drive-up the USD/EUR exchange rate?
Euro (EUR) investors will continue to monitor Europe’s Covid-19 developments. If cases and hospitalisations continue to rise in key economies such as France and Germany, then the EUR/USD exchange rate would fall.