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Eurozone Inflation Slows, Leaving Euro US Dollar (EUR/USD) Exchange Rate Flat

Euro US Dollar (EUR/USD) Exchange Rate Muted as Eurozone Awaits Trump’s Auto Tariffs Decision

The Euro US Dollar (EUR/USD) exchange rate remained muted as Eurozone inflation slowed, leaving the pairing trading at around $1.1025.

The single currency was left under pressure as Eurostat revealed its earlier estimate for the bloc’s inflation was accurate, showing inflation slowed in October.

Energy prices in the bloc slumped by 3.1%, which largely offset the 1.5% increase recorded for alcohol, food and tobacco products.

The narrower inflation indicator, which is watched closely by the European Central Bank (ECB) was confirmed to increase at 1.2%, unchanged from September’s reading.

The European Union statistics office also revealed that the Eurozone posted a larger trade surplus, as exports grew more than imports.

Meanwhile, automakers in the European Union are awaiting a decision from the US President over whether or not he will impose up to 25% tariffs on US car and auto imports.

Discussing this on Wednesday, Donald Trump said:

‘I’ll make a decision fairly soon. I was fully briefed and I’ll make a decision fairly soon.’

US Dollar (USD) Supported by US-China Hopes

On Friday, the US Dollar was supported by fresh US-China trade hopes despite no new details on talks being released.

White House economic adviser Larry Kudlow said that Washington and Beijing were getting close to a deal, and the ‘mood music is pretty good’.

Commenting on this, treasury strategist at OCBC Bank in Singapore, Terence Wu said:

‘It may not be a game-changer. Thus, we think any reversal in the risk-off trades may not see a good shelf-life.’

However, through the week there have been mixed signals on trade while evidence of the toll it’s taken on the global economy has mounted.

Added to this, the Financial Times reported that an agreement may not be reached in time to avoid the fresh round of tariffs scheduled to be slapped on Chinese goods on 15th December.

Germany Escapes Recession with a ‘Black Eye’

The single currency was left flat against the Dollar as yesterday’s data release showed that the bloc’s largest economy narrowly avoided a recession.

The German economy was expected to slide into recession during the third quarter but an increase in state spending, consumer spending and construction pushed quarterly expansion up by 0.1%.

Commenting on this, Deka Bank analyst, Andreas Scheuerle said:

‘The German economy got away with a black eye: the technical recession could be avoided.’

The Euro was provided with a further boost as European Central Bank (ECB) Vice President Luis De Guindos noted there was now a ‘very low’ risk of the Eurozone falling into recession.

However, he also said that growth is likely to remain below potential unless the bloc’s governments step up and do more.

Meanwhile, speaking in Berlin, German Finance Minister, Olaf Scholz emphasised that Germany was not in economic crisis and said there was not an immediate need for a spending boost.

Euro US Dollar Outlook: Will US Retail Sales Buoy USD?

Looking ahead to this afternoon, the US Dollar (USD) could rise against the Euro (EUR) following the release of the US retail sales.

If sales increase more than expected in October, in a positive sign for the American economy, ‘Greenback’ sentiment is likely to rise.

However, disappointing US industrial production could limit any gains and leave the pairing flat once again.

If industrial production slumps further than forecast in October, it will likely leave the Euro US Dollar (EUR/USD) exchange rate muted.