The Euro has steadied this morning after tallying considerable gains against the US Dollar on Tuesday’s session, when EUR/USD climbed to 1.1489 – the highest its reached since the 1st of May.
In regards to releases, the German WPI jumped to 0.0%, coming short of a 0.2% estimate but still demonstrating growth. More significantly the Eurozone’s year-on-year industrial production figure leapt from 1.2% for May last year to a whopping 4.0% this year, beating expectations of 3.5%. The single currency, however, seemed unresponsive to the news, continuing to level out after yesterday’s rally against the ‘Greenback’.
Separate data from Germany showed that the wholesale price index improved from -0.7% to 0.0% in June month-on-month while dipping from 3.1% to 2.5% on the year.
With this report indicating that consumer price inflation in the Eurozone’s largest economy is struggling to rise to the ECB’s 2% target, many investors worry that the ECB will be unlikely to adjust its monetary policy in the near term.
US Dollar Fluctuates after Latest Russia Drama
The US Dollar has been fluctuating following the latest stir regarding alleged ties between Russia and the Trump administration during the US election. In the name of transparency, Donald Trump Jr. released an email chain that revealed that he had been contacted by lawyer Natalia Veselnitskaya and offered evidence that would incriminate Hillary Clinton. Veselnitskaya has since told NBC News that she was not affiliated with the Russian government and had passed no information.
Whilst the correspondence does not immediately appear to provide any form of evidence of illegal activity, it is likely that it will draw the scrutiny of investigators – a return to political scandal has slightly dampened enthusiasm for the US Dollar.
US Investors Await Fed Chair Janet Yellen’s Testimony
Yesterday John Williams, President and Chief Executive Officer for the Federal Reserve Bank of San Francisco gave a hawkish statement, announcing that he still expects one more rise in interest rates this year, but that it would be dependent on US inflation eventually accelerating as expected. Williams noted that he believed the recent softening of US inflation was transitory and that it would likely pick up to around 2% in the coming year.
This afternoon Federal Reserve Chairwoman Janet Yellen is set to give a testimony to congress. Should Yellen express a hawkish tone regarding monetary policy, or even hint at some form of timeframe for changes, then the US Dollar will likely strengthen against the Euro, conversely, if she expresses a cautious attitude then fed rate hike speculation will dampen, reducing demand for the ‘Greenback’.
Current Interbank Exchange Rates
At the time of writing the Euro to US Dollar (EUR USD) exchange rate is trading at 1.1454. Conversely the US Dollar to Euro (USD EUR) exchange rate is trading at 0.8727.