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Euro US Dollar (EUR USD) Slumps with US Tax Plan due this Month

  • Euro US Dollar Hits 1.1195 – US Dollar Euro Hits 0.8335
  • US Tax Plan due to Arrive in September – USD Surges
  • US PPI Climbs in August – US Dollar Solidarity Begins to Return
  • German Inflation Hits its Mark – Euro Initially Bolstered but Unable to Capitalise

After fluctuating for most of today the Euro US Dollar exchange rate has now tumbled in the wake of House Speaker Paul Ryan’s claim that the White House will be releasing an outline of their tax overhaul proposal by the end of September.

Markets have been awaiting tax reform within the US for some time, with many beginning to worry that it would be significantly delayed or not occur at all.

US President Donald Trump’s recent comments that the process would be sped up in the wake of storm Harvey and Irma have now come to fruition, however, with it being claimed that the tax draft will be released on September the 25th.

This news immediately drove demand back to the previously struggling US Dollar, allowing it to effectively recover from the pressure caused by the recent bout of storms and indeed the escalating geo-political conflict with North Korea.

German Inflation Meets Estimates, EUR Exchange Rates Fail to Gain

Germany’s year-on-year inflation figure printed at 1.8% in August, up from the previous period’s 1.7% and matching the preliminary estimate. This was the highest inflation rate Germany has reported since April, with the rising cost of food and energy driving the figure up at an accelerating pace.

The month-on-month figure also printed in-line with forecasts at 0.1%, though it remains down from July’s 0.4% gain.

In other news, the Eurozone’s employment figures were mixed, with the number of employed persons in the Euro area jumping by 0.4% in Q2 2017, following the previous period’s upwardly revised 0.5%. It did, however, beat the 0.3% gain that was expected, marking a new record high for the bloc.

IHS Markit’s Chris Williamson echoed this sentiment, stating:

‘The stronger employment and production data will add to views that the criteria of Eurozone economic growth becoming self-sustaining are increasingly being met, and that downside risks to the outlook appear to be fading’.

Whilst these prints did initially increase demand for the Euro, it soon lost its lead on the release of the US tax reform news.

US PPI Rebounds in August, Demand Returns to USD

In other news for the USD, US producer prices jumped in August, predominantly driven by a new surge in the price of gasoline.

The Labour Department stated that producer prices for final demand in the United States advanced 0.2% month-on-month in August, missing the market forecast of 0.3% but beating the -0.1% print in July.

This news drove some demand to the ‘Greenback’ earlier in the day, pushing EUR USD further into USD’s favour.

EUR USD Forecast: US Inflation Forecast to Rise

The EUR USD exchange rate could extend its surge into tomorrow if the US inflation figures print as forecast.

The headline inflation figure for the US is expected to print at 1.8%, up from the previous period’s 1.7%.

This reading would improve the prospect of another US rate hike taking place in 2017 (even if only slightly) and increase demand for the ‘Greenback’.

Another print to keep an eye on in this regard is tomorrow’s Bank of England (BoE) rate decision, as if it proves hawkish and Sterling does rally, then traders could sell the Euro in favour of the Pound, potentially driving EUR USD down even further.