Euro US Dollar Exchange Rate Gains Ground as Eurozone Inflation Accelerates
The Euro US Dollar (EUR/USD) exchange rate is climbing this morning as Eurozone’s inflation printed at a record high. This is boosting European Central Bank (ECB) interest rate hike bets.
At the time of writing, the EUR/USD exchange rate is trading at approximately $1.0567, up roughly 0.6% from today’s opening levels.
Euro (EUR) Enjoys Tailwinds as Eurozone Inflation Rises
The Euro (EUR) is trading higher against the US Dollar (USD) this morning as the Eurozone’s consumer price index printed at a record high.
In April, inflation across the bloc reached 7.5% as expected, slightly above the previous reading of 7.4%.
This in turn has bolstered ECB interest rate hike bets. This comes as ECB policymakers have struck a broadly hawkish tone in recent weeks.
Moreover, Germany’s GDP growth rate for the first quarter exceeds predictions.
The latest figures reveal a 0.2% expansion of economic growth during the first three months of 2022. This is marginally higher than the market forecasts of 0.1% and is a strong recovery from the 0.3% contraction seen during the previous quarter.
This was largely accredited to higher capital formation. However, the Ukraine crisis has limited economic growth since February, particularly weighing on imports and exports balance sheets.
On the other hand, Eurozone GDP for the same period has slipped slightly from the previous and expected reading of 0.3% and printed at 0.2%.
The weaker-than-expected Eurozone growth is somewhat capping the Euro’s gains this month.
US Dollar (USD) Falls amid Risk-On Trade
The US Dollar (USD) is dropping against the majority of its peers this morning as a risk-on sentiment undermines the safe-haven USD.
Moreover, USD is struggling to gain traction amid profit-taking. This is a result of a strong upswing in the ‘Greenback’ in recent days.
However, the US Dollar’s shortfall is being capped by the ongoing lockdowns in China.
As the leading manufacturing country, China’s prolonged lockdowns are likely to have a negative knock-on effect on supply chains.
In addition, the hawkish perspective of Federal Reserve policymakers in recent weeks continues to underpin support for the ‘Greenback’, capping today’s losses.
Euro US Dollar Exchange Rate Forecast: Will US Data Dump Impact ‘Greenback’?
Looking ahead, the Euro US Dollar exchange rate is likely to be bolstered by US personal income and personal spending data scheduled for release this afternoon.
In March, personal income is expected to slip marginally from 0.5% to 0.4%. However, personal spending is predicted to increase from 0.2% to 0.7%. If this prints true, it is likely to buoy demand for the US Dollar.
Into next week, the ‘Greenback’ may be boosted by the manufacturing PMI for April. The data is expected to increase from 57.1 to 58.
Meanwhile, Eurozone economic sentiment is forecast to decrease slightly, limiting any support the single currency may have.
Moreover, the Ukraine crisis is likely to continue influencing market sentiment. Should Russia maintain its aggressive position against the West, it may hamper EUR potential.