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Euro to US Dollar Exchange Rate Sold from Highs as Spanish Inflation Disappoints
Published: 27 Mar at 5 PM Tags: Euro Exchange Rate, Dollar Exchange Rate, Currency Exchange, Euro Crisis, UK, Exchange Rates, Inflation, Spain, France,
In response to some underwhelming Eurozone ecostats and a recovering US Dollar, the Euro to US Dollar (EUR/USD) exchange rate shed most of its Monday gains on Tuesday. If German inflation projections due on Thursday disappoint too, the Euro to US Dollar exchange rate could continue to fall.
After edging higher from 1.2296 to 1.2358 last week, EUR/USD jumped on Monday and touched on a high of 1.2472 on Tuesday morning. This was the pair’s best level in over a month, since mid-February. The pair continued to trend above the week’s opening levels but trended near 1.24 again.
Demand for the Euro was weighed by Eurozone data on Tuesday, making it easier for a stronger US Dollar to recover – despite the pair trending less than a cent away from monthly highs.
Most notably, Tuesday saw the publication of Spain’s March Consumer Price Index (CPI) projections, which fell short of expectations in both main prints.
The month-on-month inflation projection was forecast to rise to 0.3%, but remained at 0.1%. The yearly figure only edged higher from 1.1% to 1.2%, rather than reaching the forecast 1.5%.
The lower than expected inflation stats dampened market hawkishness that the European Central Bank (ECB) was planning to hike Eurozone interest rates within the foreseeable future.
In fact, some analysts noted that while markets are betting on an ECB rate hike in Q2 next year, this may still be too early.
On top of persistent concerns that Eurozone inflation remains subdued, Tuesday’s underwhelming Eurozone confidence results kept additional pressure on the Euro.
Eurozone business confidence was expected to slip from 1.48 to 1.39, but instead fell to 1.34. Services sentiment, industrial sentiment and economic sentiment also all fell short of forecasts.
The US Dollar was able to take advantage of Euro weakness, thanks to signs that the US and China would both prefer to avoid a potential ‘trade war’.
Reports that both nations were holding talks behind the scenes to avoid a ‘trade war’ from breaking out indicated to analysts and markets that the US would still prefer to avoid major global clashes on trade despite its boisterous rhetoric in recent weeks.
With trade war concerns lightening somewhat, the US Dollar recovered slightly from weeks of poor performance. This helped it to gain against the Euro.
More losses could be ahead for the Euro to US Dollar (EUR/USD) exchange rate too, depending on key Eurozone and US data due for publication in the coming days.
Wednesday will see the publication of Q4 2017’s final US Gross Domestic Product (GDP) results, which are expected to have slowed from 3.2% to 2.7% quarter-on-quarter.
If US growth comes in even lower than expected, the US Dollar could weaken in the coming days and this could make it easier for EUR/USD to reach its highs again.
However, if Thursday and Friday inflation stats from Eurozone nations disappoint too, the Euro is likely to see stronger demand in the coming days.
German inflation projections for March will be published on Thursday, followed by French and Italian inflation stats on Friday. If they disappoint, ECB interest rate hike bets will likely fall and the Euro will weaken.
Thursday will also see the publication of some notable US data, the Personal Consumption Expenditure (PCE) price index for February.
As PCE is the Federal Reserve’s preferred measure of US inflation, the US Dollar could see a shift in direction towards the endo of the week if the PCE data surprises investors.
After edging higher from 1.2296 to 1.2358 last week, EUR/USD jumped on Monday and touched on a high of 1.2472 on Tuesday morning. This was the pair’s best level in over a month, since mid-February. The pair continued to trend above the week’s opening levels but trended near 1.24 again.
Demand for the Euro was weighed by Eurozone data on Tuesday, making it easier for a stronger US Dollar to recover – despite the pair trending less than a cent away from monthly highs.
Most notably, Tuesday saw the publication of Spain’s March Consumer Price Index (CPI) projections, which fell short of expectations in both main prints.
The month-on-month inflation projection was forecast to rise to 0.3%, but remained at 0.1%. The yearly figure only edged higher from 1.1% to 1.2%, rather than reaching the forecast 1.5%.
The lower than expected inflation stats dampened market hawkishness that the European Central Bank (ECB) was planning to hike Eurozone interest rates within the foreseeable future.
In fact, some analysts noted that while markets are betting on an ECB rate hike in Q2 next year, this may still be too early.
On top of persistent concerns that Eurozone inflation remains subdued, Tuesday’s underwhelming Eurozone confidence results kept additional pressure on the Euro.
Eurozone business confidence was expected to slip from 1.48 to 1.39, but instead fell to 1.34. Services sentiment, industrial sentiment and economic sentiment also all fell short of forecasts.
The US Dollar was able to take advantage of Euro weakness, thanks to signs that the US and China would both prefer to avoid a potential ‘trade war’.
Reports that both nations were holding talks behind the scenes to avoid a ‘trade war’ from breaking out indicated to analysts and markets that the US would still prefer to avoid major global clashes on trade despite its boisterous rhetoric in recent weeks.
With trade war concerns lightening somewhat, the US Dollar recovered slightly from weeks of poor performance. This helped it to gain against the Euro.
More losses could be ahead for the Euro to US Dollar (EUR/USD) exchange rate too, depending on key Eurozone and US data due for publication in the coming days.
Wednesday will see the publication of Q4 2017’s final US Gross Domestic Product (GDP) results, which are expected to have slowed from 3.2% to 2.7% quarter-on-quarter.
If US growth comes in even lower than expected, the US Dollar could weaken in the coming days and this could make it easier for EUR/USD to reach its highs again.
However, if Thursday and Friday inflation stats from Eurozone nations disappoint too, the Euro is likely to see stronger demand in the coming days.
German inflation projections for March will be published on Thursday, followed by French and Italian inflation stats on Friday. If they disappoint, ECB interest rate hike bets will likely fall and the Euro will weaken.
Thursday will also see the publication of some notable US data, the Personal Consumption Expenditure (PCE) price index for February.
As PCE is the Federal Reserve’s preferred measure of US inflation, the US Dollar could see a shift in direction towards the endo of the week if the PCE data surprises investors.
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Source: moneytransfer.co.uk