Euro US Dollar (EUR/USD) Exchange Rate Rallies despite Lacklustre Data

EUR US Dollar (EUR/USD) Exchange Rate Climbs amid Broad-Based USD Weakness

The Euro US Dollar (EUR/USD) exchange rate rallied today, climbing up from nine-month lows hit earlier this week.

At the time of writing the EUR/USD exchange rate is trading at €1.0541, up more than 0.3% from this morning’s opening rate.

Euro (EUR) Recovers despite Unimpressive Data

The Euro (EUR) recovered from its near nine-month lows against the US Dollar (USD) today, as the single currency tried to capitalised on the Dollar’s broad-based weakness, thanks to the currencies’ negative correlation.

Better-than-forecast Eurozone data may have helped somewhat. Although today’s release of the bloc’s economic sentiment indicator saw a slight dip from last month’s figure, it surpassed expectations, coming in at 93.3. The stronger reading may have lent EUR some support.

However, as economic sentiment continues to weaken, any gains won by the Euro may be undermined by an increasingly dismal outlook towards the Eurozone’s economic health.

In addition, a sharp decline in German inflation may be capping the common currency’s upside today.

Headline inflation in the Eurozone’s largest economy eased from 6.1% to 4.5%, just below the forecast 4.6%. The German figures are seen as something of a precursor to the Eurozone consumer price index, due out tomorrow, where softer figures could dent European Central Bank (ECB) rate hike bets.

US Dollar (USD) Slides as Inflation Data Looms

The US Dollar fell from recent highs today as investors abandoned the currency ahead of crucial US inflation data.

Tomorrow’s core PCE price index – the Federal Reserve’s preferred measure of inflation – is expected to show that price pressures continue to ease.

Such a result could dent Fed rate hike bets, and the ‘Greenback’ seems to be falling in anticipation of this today. USD investors are cashing in on the currency’s recent strength, as tomorrow could potentially see the US Dollar nosedive.

In addition, a cautiously upbeat market mood is putting some pressure on the safe-haven US Dollar, although risk sentiment seems limited as concerns about global economic growth remain.

Euro US Dollar Exchange Rate Forecast: US and Eurozone Inflation to Drive Volatility

Tomorrow, the core PCE price index is in the spotlight for USD investors. With inflation forecast to cool from 4.2% to 3.9%, we may potentially see USD fall as markets scale back Fed expectations.

Any unexpected results could prompt even greater movement, with a weaker reading potentially leading to a sharp correction in USD exchange rates.

Also due out on Friday is the Eurozone’s consumer price index. With inflation expected to have cooled rapidly this month, the CPI could see the common currency plunging if it stokes speculation that the ECB has reached the end of its tightening cycle.

Yasmine Arasteh

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