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Euro US Dollar (EUR/USD) Exchange Rate Trades Sideways as Investors Await US Inflation Data

EUR/USD Exchange Rate Remains Level in Advance of Data Release

The Euro US Dollar (EUR/USD) exchange rate is holding steady this morning as investors wait for US inflation data to print this afternoon before making any bold moves. Consensus forecast reads at 4.9%, a negligible decrease on last month’s 5%.

At the time of writing, the Euro trades at $1.1841, virtually unchanged from today’s opening levels.

US Dollar (USD) Seeks Support as Positive Data Expected

The economic calendar is pointing to another month of high inflation for the US Dollar (USD): 4.9% on the headline and 4% in Core CPI. There is little reason to doubt forecasts: the latest FOMC minutes revealed early tapering discussions as well as a positive assessment of the pace of US economic recovery.

If inflation does miss estimates, the timeline for tapering bond purchases is likely to be pushed back, inspiring potential bearishness amongst ‘Greenback’ traders. According to Reuters, ‘Dealers reckon a miss [in either yearly or monthly inflation] could move the dollar and the bond market by shifting expectations on interest rates.’

On the whole, investors appear to be waiting for cut-and-dry statistics before making any hawkish moves. Later in the week, industrial production figures and retail sales may also influence USD movement: the former is expected to have increased MoM, while retail sales anticipate a 0.4% drop.

Euro (EUR) Subdued as the European Central Bank Maintains Dovish Tone

The Euro (EUR) is weakening this morning after ECB President Christine Lagarde reiterated the bank’s pledge to be ‘persistent’ in its tapering strategy, resisting its past mistake of tightening monetary policy too soon.

Lagarde’s comments poured cold water upon EUR investors’ bullish expectations, as the European Central Bank remains one of ‘a few notable exceptions’ to the trend of central banks becoming increasingly hawkish.

Another factor limiting Euro gains is the rapid spread of the Delta covid variant throughout Europe. France, the Netherlands and Spain have announced new measures to restrict further infections, which will undoubtedly effect economic recovery in those regions.

President of the Eurogroup Paschal Donohoe remarked at yesterday’s Eurogroup meeting that Eurogroup members ‘continue to monitor the Delta variant’ as the virus plagues businesses and workers alike.

Looking forwards, tomorrow’s industrial production figures for the Eurozone may boost EUR sentiment: although if MoM figures print as expected, production will have sustained a 0.2% fall. Friday’s inflation reveal is more likely to muster support, as the consensus figure reads at 1.9%.

EUR/USD Forecast: US Dollar Set to Gain from Inflation Data and Safe-Haven Status?

Looking forwards, US inflation data will inspire today’s movements within the currency pair, with covid-19 developments determining any additional fluctuations.

Regardless of whether the data prints high or low, the spread of the covid Delta variant is likely to benefit the US Dollar, as it threatens the pace of economic recovery globally.

Later in the week, Eurozone inflation has the potential to raise the Euro closer to June’s early levels.