The Euro has declined against a stronger US Dollar today, following the news that inflation is slowing across the Eurozone.
- EUR vs Dollar rate dips to 1.1777 – USD to Euro trades higher at 0.8489
- Euro sinks after Eurozone inflation slows – Chances of ECB rate hike slip away
- US Dollar advances on higher production scores – Jobless claims greater than expected
- Euro could recover on imminent ECB speech – Will Fed speeches send USD soaring?
In the US, traders have bought the US Dollar because of signs that national production is rising by more than expected.
EUR USD Rate Worsens on Poor Inflation Reading
Forecast-matching Eurozone inflation stats have weakened the single currency today, causing a small loss against the US Dollar.
The finalised readings for October showed a slowdown from 0.4% to 0.1% on the month, in addition to a 1.1% to 0.9% drop for the core yearly figure.
None of these revisions was worse than forecast, but it doesn’t add any incentive for the European Central Bank (ECB) to consider an interest rate hike anytime soon.
Claus Vistesen of Pantheon Macroeconomics has been cautiously optimistic about future Eurozone inflation;
‘These data confirm the story of subdued core inflation pressures in the Euro area, and support the ECB’s view that monetary accommodation will be removed very slowly. That said, we think the trend in core inflation now is up…albeit gradually’.
USD to Euro Rate Strengthened by Production Stats
The US Dollar to Euro advance seen today has come from production figures for October.
During the month, industrial and manufacturing activity levels have risen by more than expected.
Elsewhere, initial jobless claims rose by more than expected. The November reading showed an increase from 239k to 249km, when economists had expected a 235k reading.
Looking at jobless claims over a long period, however, Nordea Markets Analyst Johnny Bo Jakobsen demonstrated the progressive slide in claim counts;
US jobless claims rose to a six-week high (249k), a move that may partly owe to volatility around the Veterans Day holiday pic.twitter.com/kNl99aBJ4S
— Johnny Bo Jakobsen (@jbjakobsen) November 16, 2017
Will EUR USD Exchange Rate Rise on Upcoming Draghi Speech?
The Euro has two chances to bounce back against the US Dollar on Friday, from economic events due in the morning.
The first will be a speech by ECB President Mario Draghi, on potential opportunities for Europe.
If Draghi is optimistic about the future path of the EU and the Eurozone, Euro traders could buy into the currency and trigger an appreciation.
Additionally, the Eurozone construction output reading for September is tipped to show higher growth, which is another opportunity for a EUR USD rate rise.
The next US news will be a continuation of the week’s main economic events – speeches from Federal Reserve officials.
The next cluster of remarks will come from Robert Kaplan, John Williams and Lael Brainard, all over this evening.
Kaplan and Brainard are on the Federal Open Market Committee (FOMC) this year, which means they will be voting during December’s hotly anticipated interest rate decision.
Both are seen as ‘dovish’ policymakers, which means they are more inclined to make cautious monetary policy decisions.
While Williams is only an alternate voting member this year, his words still hold weight due to his long tenure as President of the Fed Bank of San Francisco.
Williams is also seen as a more ‘hawkish’ member at the Fed, so he could voice some support for a December rate hike.
A number of economists think that there is an over-90% chance of a December rate hike, so if the Fed officials back this outcome the USD EUR exchange rate could rise sharply.
Current Interbank EUR USD Exchange Rates
At the time of writing, the Euro to US Dollar (EUR USD) exchange rate was trading at 1.1777 and the US Dollar to Euro (USD EUR) exchange rate was trading at 0.8489.