Euro US Dollar Exchange Rate Continues to Trade Close to Parity
The Euro US Dollar (EUR/USD) exchange rate is trading just above parity this morning. After briefly falling below $1.00 for the first time in 20 years yesterday.
At the time of writing the EUR/USD exchange rate is trading at around $1.0017. Down roughly 0.2% from this morning’s opening levels.
Euro (EUR) to Slump on EU’s Gloomy Growth Outlook?
The Euro (EUR) is to face an uphill battle this morning as the European Commission releases its latest economic projections.
According to a draft acquired by Bloomberg. The EC will slash its growth forecasts for 2022 and 2023, while revising its inflation expectations higher. The Commission now expects Eurozone GDP to rise 2.6% in 2022 and 1.4% in 2023. Down from its previous forecasts for 2.7% and 2.3%, respectively.
The Commission is expected to make it clear that the economic outlook is deteriorating as a result of surging energy prices and supply chain constraints.
The ECs new forecasts come hot on the heels of a warning from the International Monetary Fund, that the outlook for the global economy has darkened significantly.
IMF managing director Kristalina Georgieva said the war in Ukraine is exacerbating the cost-of-living crisis and pointed to the threat of a European gas shortage as a key recession risk.
Georgieva, said:
‘The outlook remains extremely uncertain. Think of how further disruption in the natural gas supply to Europe could plunge many economies into recession and trigger a global energy crisis.
‘It is going to be a tough 2022 – and possibly an even tougher 2023, with increased risk of recession.’
The gloomy outlook will complicate the European Central Bank’s (ECB) job of tackling inflation in the Eurozone.
There is a clear risk the ECB could tip the bloc into a recession if it is too aggressive in raising interest rates. On the other hand, too soft a touch will prolong the cost-of-living crisis.
US Dollar (USD) Buoyed by Fed Rate Hike bets
The US Dollar (USD) continues to catch bids this morning. Following the release of June’s hotter-than-expected US CPI figures.
Yesterday’s figures reported US inflation jumped to a new 40-year high of 9.1% last month.
The shock surge in inflation has bolstered Federal Reserve rate hike bets. USD investors are now pricing in an 80% chance of the Fed raising interest rates by 100bps later this month.
Euro US Dollar Forecast: Rebound in US Retail Sales to Buoy the ‘Greenback’?
The Euro US Dollar exchange rate may come under additional pressure at the end of this week, with the publication of the latest US retail sales figures.
Following a 0.3% contraction in May, June’s figures are expected to report sales growth jumped by 0.8%.
Conversely the US Dollar could face some headwinds with the publication of the University of Michigan’s consumer sentiment index. Friday’s release is expected to report household morale dropped to a new record low this month.
Meanwhile, the Euro may struggle to find support amid ongoing concerns over European energy security.