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Pressure for ECB and Fed Rate Cut Leaves Euro US Dollar (EUR/USD) Exchange Rate Flat

Euro US Dollar (EUR/USD) Exchange Rate Left Muted as German Inflation Unexpectedly Eased

The Euro US Dollar (EUR/USD) exchange rate remained muted on Tuesday afternoon.

The pairing is currently trading at an inter-bank rate of $1.1.1147.

On Tuesday afternoon, the single currency remained under pressure as data revealed that German inflation data unexpectedly eased.

Germany’s headline flash inflation came in at an annual 1.1%, down from June’s reading of 1.5%.

This was the lowest since November 2016, which adds to the picture the Eurozone is struggling to sustain momentum.

Added to this, the disappointing data may add to the case for the European Central Bank (ECB) to slash interest rates.

However, the national inflation measure rose to 1.7% in July from 1.6%

PCE Price Index Fails to Meet Federal Reserve’s Target

Meanwhile, data from the US revealed that US consumer spending and prices edged up moderately in June.

This points towards benign inflation and slower economic growth which further added to the case for a Federal Reserve rate cut.

Consumer spending rose by 0.3% as a decline in the purchases of motor vehicles was offset by an increase in services.

Meanwhile, the Personal Consumption Expenditures (PCE) price index edged up by 0.1% as both food and energy prices slipped.

The annual PCE price index rose to 1.6% in June from 1.5% in May.

The Dollar was left under pressure as this is the US Federal Reserve’s preferred measure of inflation, and it has failed to reach the 2% target.

US Dollar (USD) Flat as Trump Attacks China Following First Day of Shanghai Talks

On Tuesday, US-China trade talks resumed in Shanghai with very few visible signs.

Both the United States and China played down expectations the first in-person talks in three months would end trade tensions.

Talks were led by US Trade Representative Robert Lighthizer, Treasury Secretary Steven Mnuchin and Chinese Vice Premier Liu He.

Market expectations remained low as Washington and Beijing appear to be further apart than they were during the previous in-person talks.

Meanwhile, tensions increased as US President Donald Trump attacked China in a series of Tweets.

The President wrote:

‘China is doing very badly, worst year in 27 – was supposed to start buying our agricultural product now – no signs that they are doing so. That is the problem with China, they just don’t come through.’

Euro (EUR) Left Flat as German Consumer Confidence Slides to 28-Month Low

Earlier this morning, disappointing data from both France and Germany weighed on the Euro.

Flash data from INSEE showed that France’s second quarter GDP data slowed to a slower-than-expected 0.2%.

Exports rose by 0.2% while imports increased by 0.1%.

This revealed foreign trade did not make a contribution to growth in the bloc’s second largest economy.

Meanwhile, further data from the bloc’s largest economy showed consumer confidence slumped once again in August.

GfK German consumer confidence fell for the third consecutive month, falling to 9.7.

This was the lowest reading since April 2017 as trade tensions, the global economic slowdown and Brexit drove fears of a recession.

Euro US Dollar Outlook: Will USD Slide After an Aggressive Fed Rate Cut?

Looking ahead to Wednesday, the Euro (EUR) could edge up against the US Dollar (USD) following the release of the Eurozone’s flash Q2 GDP.

If GDP rises higher than forecast, it could provide the single currency with an upswing of support.

Meanwhile, it is likely the US Dollar will remain under pressure ahead of the US Federal Reserve interest rate decision.

If the Fed cuts by rates by a more aggressive 50 basis points, the Euro US Dollar (EUR/USD) exchange rate will rise.