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Euro US Dollar Rate Dips despite Growing Confidence in Eurozone Economy

Over Tuesday afternoon’s trading session, the Euro has seen a small rise against the US Dollar.

Trading at 1.1844 earlier, the EUR/USD exchange rate has since risen to 1.1862.

This advance follows news that initial German inflation estimates are higher-than-forecast for the year-on-year reading.

The month-on-month figure matched predictions by climbing from 0% to 0.3%, but traders have been most focused on a YoY increase from 1.6% to 1.8%.

(First published November 29th, 2017)

The Euro has made a minor loss against the US Dollar today, having been weakened by growing US optimism about monetary policy.

  • EUR USD rate declines to 1.1844 – USD EUR trades higher at 0.8440
  • Euro trades lower despite higher economic confidence – Dominant USD to blame
  • US Dollar firms after key Fed hearing – Powell backs further US interest rate hikes
  • Euro could rally on German inflation stats – Will USD rise further on GDP data?

Federal Reserve news has raised confidence in the US Dollar, as traders consider how the next Fed Chair will adjust bank policy.

Rising Eurozone Confidence Scores Fail to Ensure Euro US Dollar Advance

Eurozone confidence scores have been positive today, but still not enough to enable a EUR/USD rate rise.

The minor Euro losses are primarily down to US Dollar strength, given how universally supportive the earlier confidence stats were.

Business confidence rose in November, as did readings for consumer confidence, industrial sentiment and economic sentiment.

Future inflation expectations have also risen, providing further support to the Euro.

Signs of tighter US monetary policy have been a limiting factor on the Euro today, largely negating the positive impacts of the Eurozone confidence stats.

Confirmation Hearing for Fed’s Powell Boosts USD/EUR Trading

The US Dollar has made minor gains against the Euro today, in the wake of a key confirmation hearing for Jerome Powell.

Powell is a current member of the Federal Reserve, the US’s central bank, and is on track to be the bank’s next leader in 2018.

The presumed future Chair was questioned about his stance on US interest rate hikes and answered accordingly;

‘I think the patience has served us well. It’s time for us to be normalising interest rates’.

While a general statement, this has already raised hopes of a series of US rate hikes over 2018.

EUR USD Clash possible on German Inflation and US GDP

Upcoming Eurozone and US data is considered high-impact, and the German inflation reading and a US GDP measure will also be out around the same time.

This might mean that both currencies trade tightly against each other, assuming that data predictions prove accurate.

German inflation stats, out shortly, are expected to have risen in November. Such movement might bolster the Euro and push it up against the US Dollar.

Economists think the preliminary reading will show a rise from 1.6% to 1.7% for the year-on year reading, along with a month-on-month increase from 0% to 0.3%.

The German economy is the largest in the Eurozone, so rising inflation here has a strong effect on the Eurozone-wide inflation rate.

The European Central Bank (ECB) has long been waiting for Eurozone inflation to stay around the 2% mark and a strong German result will certainly help in this regard.

On the other hand, also-imminent US GDP data is set to show growth.

Q3 US GDP figures are forecast to show higher growth for the second estimates, from 3.1% to 3.2% for the quarterly reading.

Such a result could send the US Dollar rallying, as greater US GDP raises the chances of tighter US monetary policy in the future.

Current Interbank EUR USD Exchange Rates

At the time of writing, the Euro to US Dollar (EUR USD) exchange rate was trading at 1.1844 and the US Dollar to Euro (USD EUR) exchange rate was trading at 0.8440.