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Euro to US Dollar Exchange Rate Sheds Last Week’s Gains on Renewed Trade Jitters and US Inflation Hopes

Euro to US Dollar Exchange Rate Slumps as USD Traders Anticipate US Inflation Results

While the US Dollar (USD) was sold at the end of last week, the Euro to US Dollar (EUR/USD) exchange rate has shed those gains as of Thursday this week thanks to hopes for higher US inflation.

Last week, EUR/USD climbed from 1.1690 to around 1.1754. EUR/USD advanced at the beginning of this week and briefly touched a three-week-high of 1.1787 on Monday before slipping again.

At the time of writing on Thursday, EUR/USD was trending near the week’s worst levels – 1.1668.

The Euro (EUR) was unable to recover much against the US Dollar on Thursday morning, as France’s latest Consumer Price Index (CPI) fell short of forecasts.

Ultimately though, trade jitters and US Dollar strength has been the main driver of the Euro to US Dollar exchange rate since Wednesday and investors are now anticipating the US inflation data due on Thursday afternoon.

Euro (EUR) Exchange Rates Pressured as French Inflation Rate Disappoints

Investors haven’t had much reason to support the Euro in recent sessions, as Eurozone data has been mixed or disappointing.

Thursday morning saw the publication of this week’s most influential Eurozone data, with Germany and France’s final June Consumer Price Index (CPI) results being published.

Germany’s June inflation rate met all projections, coming in at 0.1% month-on-month and 2.1% year-on-year as expected.

However, the French inflation results concerned investors, as every print fell short of projections. Month-on-month inflation printed at a stagnant 0.0% rather than the expected 0.1%, while the yearly figure failed to climb to the projected 2.1% and instead remained at 2%.

The news dampened market hopes that the European Central Bank (ECB) would be in a hurry to tighten Eurozone interest rates at a faster pace than expected, despite speculation this week that some ECB policymakers were considering a rate hike as soon as July 2019.

As a result of this and concerns that US trade protectionism could dent the Eurozone economy, the US Dollar more easily pushed EUR/USD lower.

US Dollar (USD) Exchange Rates Supported by Trade Jitters and US Inflation Hopes

Despite warnings from some economists that the US economy could feel some of the worst sting from US President Donald Trump’s protectionist trade tariffs, the US Dollar has been benefitting from the latest jump in trade jitters.

Amid concerns about escalating tariffs in the US-China trade war, investors have been selling risky investments in favour of safe havens, and the safe US Dollar has been even more appealing than other safe currencies this week.

Some analysts argue this is due to the current strength of the US economy, leading markets to see the US Dollar as safer than rivals despite the potential trade war jitters.

On top of this, the US Dollar has been supported by signs that US inflation may be strengthening, despite last week’s US wage growth data disappointing investors.

June’s US Producer Price Index (PPI) results beat expectations in all prints, indicating that producers were experiencing higher price pressures.

This slightly eased concerns that had risen since last week’s US wage data, and bolstered US Dollar appeal ahead of Thursday’s anticipated US inflation report.

Euro to US Dollar (EUR/USD) Forecast: US Inflation Results in Focus

The US Dollar has been benefitting from market trade war jitters and hopes for stronger US inflation, but much of its recent strength could fade if Thursday afternoon’s US ecostats disappoint.

June’s final US Consumer Price Index (CPI) results will be published during Thursday’s American session.

The inflation rate is forecast to have risen in its year-on-year prints, from 2.8% to 2.9% in the key print and from 2.2% to 2.3% in the core print.

The monthly inflation rate is forecast to have stayed at 0.2% in both key and core figures.

If the US inflation results meet or beat expectations, investors will be reassured that US price pressures are sturdy and will likely support four 2018 interest rate hikes total from the Federal Reserve.

However, if the US inflation figures fall short, Fed rate hike bets could weaken and this would make it easier for the Euro to US Dollar (EUR/USD) exchange rate to advance over the next week.