The Euro (EUR) to US Dollar (USD) Exchange Rate weakened to its lowest level in 8-months on Wednesday after economic data out of the United States showed that the world’s largest economy rebounded strongly in the spring.
Against the Pound (GBP) the Euro inched higher but remained hovering close to 22-month lows.
The single currency remains under broad selling pressure due to concerns over the divergence in monetary policy between the European Central Bank and its major peers such as the US Federal Reserve and the UK’s Bank of England.
The stagnation in the Eurozone economy is a stark contrast to the economic growth being seen in the UK and US economies.
Earlier in the session the Euro was put under more pressure after consumer price inflation data out of Germany underlined worries over the threat of deflation in the single currency bloc.
According to the report published by Germany’s Federal Statistics Bureau, consumer price inflation increased by 0.8% in July, a fall from the 1% increase recorded in June.
The figure matched economist forecasts.
As the session progressed the Euro to US Dollar Exchange Rate fell to a fresh eight-month low as data released by the Washington based Commerce Department showed that the US economy grew at an annual rate of 4% in the second quarter.
In the first quarter of the year GDP in the USA contracted sharply by a revised figure of 2.1% as harsh winter weather impacted heavily upon economic activity.
The cause for the strong recovery was a result of a strong 2.5% increase in consumer spending, which makes up more than two-thirds of the nation’s economic activity. Business spending also increased by 14% as businesses restocked their inventories.
Personal consumption grew 2.5%, well above predictions of 1.9%, the report said, adding to the view that the economic recovery is gaining traction.
Despite the strong data the US recovery since the height of the financial crisis in 2009 remains the weakest since World War Two.
Investors will now be awaiting the outcome of the Federal Reserve’s latest policy meeting later in the evening, as well as the government nonfarm payrolls report for July on Friday. Stronger payrolls figures will likely increase speculation that the Federal Reserve could hike interest rates sooner than initially expected.
The Euro is likely to soften further on Thursday if the latest Eurozone core inflation and unemployment data comes in weaker than forecast.
Euro data releases for Thursday July 31 and Friday August 1
31 July
7:00 am German Retail Sales MoM/YoY
8:55 am German unemployment data
9:00 am Italian unemployment data
10:00 am Eurozone core inflation and unemployment data
1 August
8:55 am German Markit/Manufacturing PMI
9:00 am Eurozone Markit/Manufacturing PMI
Euro Exchange Rates
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Euro,
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