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Euro US Dollar (EUR/USD) Exchange Rate Slides as Fed Rate Expectations Grow

EUR/USD Exchange Rate Dips as US Inflation Boosts Fed Rate Bets

The Euro US Dollar (EUR/USD) exchange rate is drifting lower this morning, with rising US inflation helping to drive Federal Reserve rate expectations.

At the time of writing the EUR/USD exchange rate is currently down around 0.3%, with the pairing nearing a new two-week low.

US Dollar (USD) Exchange Rate Bolstered by Strong Rate Expectations

The US Dollar (USD) appears to be leading the change on currency markets this morning, surging ahead against the Euro (EUR) and most of its other peers as it found support from rising Fed rate expectations.

This comes in the wake of the latest US CPI figures, which revealed inflationary pressures in the US continue to steadily build in June, with inflation climbing to a six-year high of 2.9%.

Economists are confident this continued build up in inflation will further the case for the Federal Reserve to raise interest rates up to four times in 2018.

Piotr Matys, FX Strategist at Rabobank said:

‘The latest set of inflation data confirms that the Fed will stay well ahead of other central banks. We believe the US Dollar has the potential to extend its rally.’

Further lifting the US Dollar has been the recent uncertainty surrounding global trade, with growing tensions between the US and China stoking demand for safe haven currencies such as USD.

Koji Fukaya, President of FPG Securities in Tokyo, said:

‘The US Dollar has benefited this week from the trade conflict concerns that emerged earlier, which ended up funnelling safe-haven bids into the currency.

Euro (EUR) Exchange Rate Subdued on Bulgaria Greenlight

Meanwhile the Euro (EUR) exchange rate appears subdued this morning following the news that the EU is backing Bulgaria as it takes the first steps towards joining the Euro.

Eurozone finance ministers gave the greenlight to Bulgaria on Thursday as it moves towards joining the currency bloc.

While the country is likely still some way off full adoption of the Euro, Eurozone ministers have agreed to a framework for Bulgaria’s next steps, to joining the banking union, with the Capital, Sofia likely to be the first to begin using the single currency, in a process that could take about a year.

EUR/USD Exchange Rate Forecast: US Retail Sales to Drag on USD Next Week?

Looking ahead to next week’s session, the Euro US Dollar (EUR/USD) exchange rate could find some respite on Monday, following the publication of the latest US retail sales figures.

Economists forecast that US sales growth will have slowed in June, sliding from 0.8% to 0.6% and likely forcing the ‘Greenback’ to relinquish some of the gains made this week.

Meanwhile potentially aiding the Euro’s rally will be the release of the Eurozone’s most recent trade balance, with a suspected rise in the bloc’s trade surplus in May possibly driving the single currency higher.