EUR/USD Exchange Rate Steady Following German Inflation Figures
The Euro to US Dollar (EUR/USD) exchange rate has been left adrift this morning after data confirmed that German inflation slowed to an eleven-month low in March.
At the time of writing EUR/USD exchange rate is virtually unchanged this morning, with the pairing trading at around $1.1279.
Euro (EUR) Exchange Rate Rangebound as German CPI Slows
The Euro (EUR) is rangebound against the US Dollar (USD) and the majority of its other peers this morning after Germany releases its final CPI reading for March.
Germany’s federal statistics agency Destatis confirmed a preliminary estimate that domestic inflation slowed from 1.5% to 1.3%, or 1.7% to 1.4% when harmonized with EU standard in March.
The slowdown in inflation appeared to be mostly attributed to food prices, as food inflation slowed from 1.4% to 0.7% last month.
Stripping out volatile food and energy prices, the data showed a slightly more positive picture, with core inflation edging higher.
However this is unlikely to be enough to spur confidence in the Euro, with analysts warning that the subdued reading pours cold water on the European Central Bank’s forecast that the slowdown in inflation will prove to be temporary.
Carsten Brzeski, economist at ING Germany said:
‘Unfortunately, the German experience casts doubts on the ECB’s view that the pass-through of higher wages on inflation has only been delayed and not derailed.’
US Dollar (USD) Flat as FOMC Minutes Confirm Fed’s Cautious Outlook
Meanwhile, helping to limit the appeal of the US Dollar (USD) this morning was the publication of the minutes from the Federal Open Market Committee’s (FOMC) March policy meeting.
The minutes underscored the Federal Reserve’s shift towards a more cautious approach to monetary policy this year and its pledge to remain patient when it comes to interest rates.
The FOMC minutes read:
‘In light of global economic and financial developments and muted inflation pressures, the committee will be patient as it determines what future adjustments to the target range for the federal funds rate may be appropriate to support these outcomes.’
These came hot on the heels of the latest US CPI reading, where a surprise fall in underlying inflation fuelled speculation that US interest rates will remain on hold through 2019, further limiting the appeal of the US Dollar.
EUR/USD Exchange Rate Forecast: Euro to come under Pressure as Eurozone Industrial Production Contracts?
Looking ahead, the Euro US Dollar (EUR/USD) exchange rate looks likely to struggle at the end of this week’s session, with the release of the Eurozone’s latest industrial production figures.
Economists forecast that after expanding by a healthy 1.4% in January factory output in the bloc will have contracted 0.6% in February, likely denting the single currency.
In the meantime, the US Dollar could stumble later this afternoon, depending on the tone struck by Fed policymakers in a series of speeches, with a broadly dovish outlook in line with the recent FOMC minutes likely to limit the appeal of the US currency.