The Euro US Dollar (EUR USD) exchange rate leapt by around half a cent his morning as upbeat Eurozone CPI figures helped the pairing to bounce back from its recent losses.
Eurozone inflation rebounded to 1.9% in April, almost completely reversing the drop to 1.5% seen in March and falling just short of the European Central Bank’s (ECB) target rate of 2.0%.
The jump helped to offset yesterday’s losses following a dovish outlook from the ECB as it suggested that its ultra-loose monetary policy would have to remain in place until underlying inflation was stronger.
Markets were therefore particularly upbeat as the accompanying Core Inflation rate, which removes volatile items such as food and fuel surged from 0.7% to 1.2%, suggesting that underlying inflation is beginning to show some improvement.
EUR USD was also strengthened this morning by the release of Spain’s latest GDP figures as they unexpectedly rose from 0.7% to 0.8% in the first quarter.
Markets were upbeat as analysts predicted that this growth was likely to continue later into 2017 as well.
Geoffrey Minne, Economist at ING said;
‘1Q GDP growth was higher than in the two previous quarters and as we expected, the momentum does not seem to be fading away in 2017. No details are available for the moment but we can reasonably infer that domestic demand remains the engine of Spanish growth.’
Meanwhile the US Dollar has been weakened by comments from US President Donald Trump saying that a ‘major, major conflict’ was possible with North Korea as he steps up his rhetoric in the face of threats from Pyongyang to conduct further missile and nuclear tests.
While Trump still advocated for a peaceful resolution to the situation, saying that he would work closely with China to try and prevent things from escalating further, he appeared resolute in his desire to see the North Korean nuclear issue solved once and for all.
In an interview with Reuters the President said;
‘We’d love to solve things diplomatically but it’s very difficult, there is a chance that we could end up having a major, major conflict with North Korea.’
The comments have done little to help the US Dollar as markets fear the repercussions that could come from the US committing to military strikes against one of China’s major allies, with the renewal of tensions in the area possibility impacting US trade relations.
Looking ahead the EUR USD exchange rate may strengthen this afternoon as the latest preliminary US GDP reading is expected to report that US economic growth slipped from 2.1% to 1.1% in the first quarter of 2017.
Meanwhile the Euro may strengthen next week as the Eurozone’s latest employment data is expected to show that the Unemployment Rate fell from 9.5% to 9.4% in March.
Current Interbank Exchange Rates
At the time of writing the EUR USD exchange rate was trending around 1.09 and the USD EUR exchange rate was trending around 0.91.