Euro US Dollar Exchange Rate Struggles for Direction Following Better-Than-Expected US Inflation

The Euro US Dollar (EUR/USD) exchange rate is struggling to find any meaningful gains this morning following the better-than-expected US inflation figures from yesterday afternoon which saw the single currency sour.

At the time of writing the EUR/USD exchange rate is trending around the $1.1789 level as industrial production figures from the Eurozone look to limit EUR further.

Euro (EUR) Struggles against US Dollar Strength

The Euro has been struggling to find direction this morning following the unexpected rise in US inflation yesterday.

Due to the negative correlation between the Euro US Dollar pairing, the ‘Greenback’ soared whilst the Euro soured.

It comes as more Eurozone countries tighten lockdown restrictions to battle a surge in coronavirus cases across the bloc.

France has become the latest country unveiled new measures at the start of the week, including making health certificates mandatory in cafes, bars and restaurants from next month.

Half of Portugal remain under night-time curfew restrictions and Germany are closely keeping an eye on coronavirus data as cases rise 32%.

More so, industrial production fell -1% across the Eurozone during May as supply-chain issues hampered production.

US Dollar (USD) Supported by Surprise Rise in US Inflation

The US Dollar continues to be supported this morning following the surprise rise in US inflation released yesterday afternoon.

Forecasts had expected inflation to soften to 4.9% during June, but instead consumer prices rose to 5.4% a 13 year high.

James Knightley, an ING economist commented on what the rise in inflation could mean for the Federal Reserve moving forward:

‘Yet another blowout inflation reading makes it increasingly difficult for the Fed to stick to its position that elevated inflation readings are merely ‘transitory’. Pipeline cost pressures continue to build and corporates are looking to pass them onto customers in an environment of such robust demand.’

‘The Fed have shifted their viewpoint to a 2023 start point for interest rate increases, but we think this is too late and are now predicting two in the second half of 2022.’

Euro US Dollar Exchange Rate Outlook: US Economic Data in Focus

A lack of notable data from the Eurozone will tomorrow see Euro investors keeping an eye on any further coronavirus developments across the bloc.

As cases continue to rise many countries in the Eurozone, leaders look to re-impose lockdown restrictions to battle the virus.

US Dollar traders will keep an eye on industrial production figures alongside initial US jobless claims tomorrow.

If the data continues to show a sustained recovery and growth in the US economy we can expect the US Dollar to head higher.

Georgina Clissold

Contact Georgina Clissold