- Euro US Dollar Slides 1.1706 – US Dollar Euro Hits 0.8541
- Investors Flock to Safe Haven ‘Greenback’ due to Geo-political Volatility – EUR USD Depreciates
- US Inflation Expectations Rise – US Dollar Gains Bolstered
The Euro to US Dollar exchange rate continued its descent this morning as investor demand for the ‘Greenback’ surged in the face of increasing geo-political volatility.
Geo-political tensions between the US, North Korea and China regarding the continued development of North Korea’s nuclear delivery systems have only escalated in recent months.
US President Trump has attempted to pressure China (who is responsible for 90% of North Korea’s trade) into putting forward sanctions on North Korea, but the success of such sanctions has, thus far, been questionable.
The latest escalating string of exchanges between the two countries drove markets to seek ‘safer’ grounds for investment, as President Trump asserted that continued threats to the United States would be met with ‘fire and fury like the world has never seen’.
North Korea responded today with another statement detailing their plan to attack US territory Guam.
Guam Governor Eddie Calvo, however, dismissed this as an escalation, asserting that there was no heightened threat.
‘They’re now telegraphing their punch, which means they don’t want to have any misunderstandings. I think that’s a position of fear’.
Nonetheless, markets remain unconvinced, as investors rush to traditional reserve currencies like the ‘Greenback’ and the Swiss Franc (CHF), driving the Euro to US Dollar exchange rate down.
US Dollar (USD) Bolstered in Anticipation of Inflation Figures
Analysts surveyed by Bloomberg have expressed optimism in regards to tomorrow’s US inflation rates, asserting that the month-on-month figure for July will rise 0.2%.
Should this materialise then it would signal the end of a four-month long stretch of below forecast readings, something that could prompt a change in attitude from the Federal Reserve.
Michelle Meyer, head of US economics at Bank of America Corp stated on the subject:
‘For the Fed, the burden is on the CPI data to turn higher in the next few months’.
Fed officials don’t exactly agree on the issue, however.
Whilst President of the San Fransciso Fed John Williams recently asserted that the US would reach its 2% inflation goal in a ‘year or two’, St. Louis Fed President James Bullard said otherwise, stating that he was ‘not too optimistic that we will have higher inflation’ and that they yet had a ‘ways to go’.
Regardless, if the figure prints higher than expected the EUR USD exchange rate will tumble in response.
EUR USD Forecast: German Inflation on the Horizon
Tomorrow’s final German CPI figures are currently predicted to remain at 0.4% month-on-month and 1.7% year-on-year. The release of these figures will draw some attention, but their ability to cause movement within the EUR/USD pairing may well be limited by on-going geo-political volatility.
The Euro itself is not currently regarded as anywhere near as ‘safe’ as the US Dollar, so with tensions surrounding North Korea remaining high, the EUR USD exchange rate may well remain unperturbed by even a positive jump in the German inflation figure.