EUR/USD Exchange Rate Increases Slightly as Inflation Data Misses ECB Targets
The Euro US Dollar (EUR/USD) exchange rate edged slightly higher today, leaving the pairing trading around $1.122.
The Euro (EUR) rose against the US Dollar (USD) following today’s publication of the Eurozone’s month-on-month inflation data for June.
These exceeded forecasts and rose by 0.2%, despite the 0.1% consensus.
Year-on-year figures, meanwhile, also edged higher by 1.3%.
However these stayed well below the European Central Bank’s target, further heightening the possibility that it will cut interest rates to boost the economy.
Marion Amiot, an Economist at S&P Global Ratings, on other factors, saying:
‘The global slowdown [could also] exacerbate the persistent weak inflationary pressures, which could cause inflation expectations and the ECB’s target to diverge further.’
USD/EUR Exchange Rate Dips as US Housing and Building Permits Figures Fall in June
The US Dollar, meanwhile, has been plagued by increasing risk-off attitude following Iran’s rejection of potential peace talks along with increasing uncertainty surrounding US-China trade discussions.
Today also saw the publication of the US month-on-month housing starts figures for June.
These fell below forecasts, missing their consensus 1.261 million rise and coming in at 1.253 million instead.
US building pretermits also fell in June, shrinking from 1.299m to 1.220m – a two year low.
James Knightley, the Chief International Economist at ING, commented:
‘The sector has been facing significant headwinds. Material costs have been rising and there is the obvious exposure to trade tensions given imports of timber and metal.’
‘There has also been plenty of commentary around the lack of available lots while the Fed’s Beige Book has talked of a lack of labour in the sector despite strong hiring – construction payrolls rose 21,000 in June.’
As the US economy faces increasing pressure on its economy due to a slowing global economy, this is leaving some ‘Greenback’ traders feeling jittery on expectations that the Federal Reserve could cut its interest rates as early as this month.
EUR/USD Outlook: US Jobs Data in Focus
US Dollar investors will be looking ahead to tomorrow’s US jobs figures for July.
Any signs of improvement could ease fears of an aggressive Fed monetary policy going forward, which would prove USD-positive.
Tomorrow will also see the Philadelphia Fed Manufacturing Survey for June.
As this is expected to improve, we could see the USD begin to claw back some of its losses against the European currency today.
Euro traders, meanwhile, will be focusing on Brexit developments as the UK appears to be taking a harder stance over the Northern Irish border, with two Tory leadership hopefuls are now showing more favourability towards a chaotic exit from the European Union.
Any further signs of tensions rising between the EU and the UK could begin to weigh on market confidence in the Euro, thus weakening the EUR/USD exchange rate.