Euro US Dollar (EUR/USD) Exchange Rate Muted as Markets Mull Over EU CPI Data
The Euro US Dollar (EUR/USD) exchange rate is rangebound today, as markets digest the latest Eurozone CPI releases.
At the time of writing, EUR/USD is trading around US$1.0593, showing little movement from the morning’s opening rates.
Euro (EUR) Muted as Markets Mull Over EU CPI Data
The Euro is lacking in direction today, following this morning’s mixed inflation data prints.
While the final headline inflation reading for January came in, as forecast, at 8.6%, the final core inflation rate was revised upward.
This rise in core inflation could prompt an uptick in bets that the European Central Bank (ECB) will continue their current tightening cycle. While the bank remains consistently hawkish, the promise of further hikes has done little to inspire investors thus far, but the data today could strengthen the ECB’s argument.
However, the Ukraine-Russia conflict is likely remaining an anxiety for EUR investors. Tomorrow marks the one-year anniversary of Russia’s invasion, and analysts are expecting a renewed ground offensive.
Similarly, Russian President Vladimir Putin has ratcheted up his rhetoric in an attempted show of strength. Because of this, the single currency is likely seeming an unattractive proposition as peace seems unlikely.
US Dollar (USD) Firms as Rate Hike Bets Continue Rising
The US Dollar (USD) is firming this morning, as USD investors continue to expect further tightening from the Federal Reserve.
Last night’s release of the Federal Open Market Committee (FOMC) meeting minutes showed the Fed was open to further hikes.
The minutes stated:
‘In discussing the policy outlook, with inflation still well above the Committee’s 2 percent goal and the labor market remaining very tight, all participants continued to anticipate that ongoing increases in the target range for the federal funds rate would be appropriate to achieve the Committee’s objectives.’
With this in mind, USD investors are supporting the US Dollar as they hope for further hikes.
Furthermore, an uptick in US Treasury bond yields may also be supporting the ‘Greenback’, and are usually indicative of further rate hike bets.
Euro US Dollar (EUR/USD) Exchange Rate Forecast: US Core PCE Data to Boost USD?
Looking ahead for the US Dollar, the core catalyst of movement is likely to be tomorrow’s core PCE price index data.
As the Federal Reserve’s preferred gauge of inflation, Friday’s yearly data for January is currently forecast to show an increase. As such, it may instigate further rate hike bets among USD investors, and strengthen the ‘Greenback’.
For the Euro, tomorrow brings the latest GfK consumer confidence data for Germany. With March’s index forecast to increase to -30.4, the slight decrease in pessimism could inspire some confidence amongst EUR investors.
However, as Friday is the first anniversary of Russia’s invasion of Ukraine, anxieties over a possible escalation may keep the Euro depressed.
