(Updated 16:00, 13/07/21) The Euro US Dollar exchange rate has soured throughout the day following the latest US inflation figures beating forecasts and rising to 5.4% YoY during June, a 13 year high.
Ambrose Crofton, Global Market Strategist at J.P. Morgan Asset Management commented on what the rise in inflation could mean moving forward:
‘The big question for markets and the Federal Reserve is the extent to which inflationary pressures persist. Many of the price increases in areas most affected by the reopening are likely to temper in the coming months – used cars, hotels and airfares, for example. But some components of today’s report raise the prospect that underlying inflationary pressures are set to linger longer than most expected.’
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The Euro US Dollar (EUR/USD) exchange rate has stumbled since markets opened this morning as German inflation softened to 2.3% during June.
At the time of writing the EUR/USD pairing are trending around the $1.1824 level as US Dollar traders await the latest inflation rate figures from the US later on in the day.
Euro (EUR) Stumbles on German Inflation Figures
The Euro has stumbled since markets opened this morning as the Eurozone’s largest economy, Germany, saw inflation soften to 2.3% during June – as forecast.
Whilst consumer price inflation remains above the European Central Bank’s (ECB) target of 2% the softening indicates a slowdown in Germany’s economic recovery from coronavirus.
More so, comments from ECB president Christine Lagarde have further limited the appeal of the Euro, speaking to the Financial Times today Lagarde spoke on inflationary pressures saying:
‘New strategy gives us the ability to be flexible around 2% inflation. 2% is not a ceiling, we recognize there will be oscillation around 2%. We accept that it may imply on a transitory basis, moderate deviations above 2%.’
The Euro continues to trade in a mixed range in relation to the ongoing surge in coronavirus cases as many Eurozone countries look to re-introduce coronavirus restrictions.
US Dollar (USD) Awaits US Inflation Rate Data
The US Dollar has been steady this morning as markets await the latest inflation figures from the US this afternoon.
US inflation is forecast to have softened from 5% to 4.9% during June, however if inflation rises above 5% then USD could soar, and markets become even more jittery over inflationary pressures.
A more cautious market mood adds further support to the US Dollar this morning as investors head towards the safe-haven USD whilst awaiting this afternoons economic data releases.
Euro US Dollar Exchange Rate Outlook: Eurozone Industrial Production in Focus
For Euro traders, tomorrow will see the release of the latest Eurozone industrial production figures for May which are expected to contract -0.2% as supply chain issues cause havoc across the globe.
The slowdown in industrial production could cause the Euro to weaken during tomorrow’s trading session.
For US Dollar investors, the global market mood will continue to drive movement in USD exchange rates as a lack of economic data could limit the appeal of the ‘Greenback’. Ambrose Crofton, Global Market Strategist at J.P. Morgan Asset Management