EUR/USD exchange rate weakens as Eurozone CPI cools
The euro US dollar (EUR/USD) exchange rate is losing ground this morning following the publication of the Eurozone’s latest consumer price index (CPI).
At the time of writing, the EUR/USD exchange rate is trading at around €1.1085, down roughly 0.4% from this morning’s opening rate.
Euro (EUR) hobbled by inflation data
The euro (EUR) is losing ground against most of its counterparts this morning following the release of the Eurozone’s latest consumer price index (CPI).
The initial report showed that headline inflation slowed more than anticipated in September, with the index falling from 2.2% to 1.8%, slightly below the more conservative 1.9% forecast.
Likewise, core inflation also eased in September, with the index slipping from 2.8% to 2.7%, contrary to market expectations that it would hold steady.
Coming on the heels of Germany’s inflation data released yesterday, which also cooled more than expected and hit 1.6%, today’s report has added further pressure onto the euro.
Both German and Eurozone inflation rates have now dipped below the European Central Bank’s (ECB) 2% target.
The slowdown in inflation across the bloc has intensified recent speculation about ECB interest rate cuts, with today’s data fuelling the current conjecture. Consequently, the common currency is finding it challenging to attract investors so far.
US dollar (USD) firms ahead of high impact data
The US dollar (USD) in drifting higher against the majority of its peers this morning as the safe-haven ‘greenback’ is being buoyed by today’s risk-off mood.
Further lifting USD exchange rates today are yesterday’s hawkish remakes from Federal Reserve Chair Jerome Powell, who stated that the Fed are ‘not in a hurry to cut rates quickly’.
However, the US dollar could relinquish the bulk of these gains in the second half of today’s European session following the publication of both the latest ISM manufacturing PMI for September and the latest Job Openings and Labor Turnover survey (JOLTs) for August.
The latest manufacturing PMI is forecast to confirm another month of contraction within the sector, while the latest JOLT survey is expected to report its lowest reading since January 2021.
Should both data releases print as expected, this could undermine USD exchange rates should the respective indices ramp up Federal Reserve interest rate cut bets.
EUR/USD forecast: Eurozone data to drive movement?
Looking ahead, the primary catalyst of movement for the euro US dollar exchange rate looking at tomorrow will likely be the publication of the Eurozone’s latest unemployment rate.
The Eurozone’s unemployment rate is anticipated to hold steady at its historic low of 6.4% which could provide the euro with some moderate backing moving into Wednesday.
Turning to the US dollar, domestic data will be thin on the ground, and as such, will likely see the ‘greenback’ continue to trade in line with risk dynamics.
