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Euro US Dollar (EUR USD) Steady as Eurozone Core Inflation Increases

  • Eurozone Core Inflation Increases to 1.3% in July 2017 – Up from 1.2%
  • Eurozone Unemployment Drops from 2% to 9.1% in June – EUR USD Remains Steady
  • US GDP Doubles Quarter-on-Quarter – US Dollar Struggled to Capitalise due to Soft Wage Growth and Political Volatility

Whilst the Euro to US Dollar exchange rate remains teetering around 2 1/2 year highs, the pairing steadied this morning despite Eurozone core inflation hitting a four-year high and unemployment levels dropping.

Eurozone inflation remained stable in July at 1.3% – the figure markets were expecting – the core reading, however, (which excludes food and energy) demonstrated an increase to 1.3%, up from previous 1.2%.

The core figure is closely monitored by investors, and with the European Central Bank (ECB) historically having slashed rates to record lows and pushed its quantitative easing programme for so long, markets are now betting that the ECB may be prepared to withdraw support if inflation moves closer to target levels.

The potential withdrawal of the ECB’s quantitative easing scheme based on the growing core inflation figure was, however, not enough to bolster the Euro US Dollar exchange rate this morning, even if it did push the Euro higher against most of the majors.

Eurozone Unemployment Drops to Lowest Level since 2009, EUR USD Remains Static

Also on the data front this morning was the Eurozone’s unemployment figure, which unexpectedly dropped from 9.2% in May to 9.1% in June – the lowest level since 2009.

Germany, the most significant economy within the EU, recorded an unemployment rate of 3.8%in June, down from May’s 3.9%.

Within Italy unemployment also dipped from 11.3% in May to 11.1% in June – with the country adding some 60,000 to the workforce, whilst in Spain the figure also dropped from 17.3% to 17.1%.

These figures have gone far to cement the Eurozone’s near-term positive economic outlook.

The Euro to US Dollar exchange rate has, regardless, remained bearish this morning.

US GDP Almost Doubles Quarter-on-Quarter, US Dollar (USD) Bolstered

Last week saw the US Dollar bombarded with mixed news. On one hand, quarter-on-quarter US GDP over  doubled, on the other, US President Donald Trump fired Reince Priebus (his chief of staff) whilst the Republican effort to repeal and replace Obamacare fell short yet again.

In respect to GDP; real US gross domestic product demonstrated growth of 2.6% in Q2 2017, more than double the revised 1.2% in Q1. Whilst this figure is great news, it did not provoke much of an immediate change, as PCE prices and Michigan’s inflation levels both missed their respective marks.

Controversy within the White House, on the other hand, weighed on the ‘Greenback’, as chief of staff Reince Priebus was pushed out after an extremely volatile six-months to be replaced by John F Kelly, previous Secretary of Homeland Security and four-star Marine General.

The US political scene has been turbulent over the last few months, as feuds and political controversies have damaged investor sentiment towards the Republican Party, specifically regarding their ability to proceed with things like Trump’s promised tax reforms. Priebus being fired added more fuel to this fire on Friday, especially in the wake of the Republican Party failing to secure enough votes to reform/repeal Obamacare.