Euro US Dollar (EUR/USD) Exchange Rate Trades Narrowly amid Risk-On Mood
The Euro US Dollar (EUR/USD) exchange rate is trending sideways today. A risk-on mood may be capping gains for the pairing. Some dovish signals from European Central Bank (ECB) President Christine Lagarde may also be weighing on the exchange rate.
On the other hand, EUR/USD may be seeing its losses cushioned by weaker US inflation and signs of a Federal Reserve slowdown.
At time of writing the EUR/USD exchange rate was at around $1.1056, virtually unchanged from this morning’s opening figures.
Euro (EUR) Edges Higher amid Hawkish ECB Signals, Subdued Against USD
The Euro (EUR) is edging higher today despite a return of global risk appetite. EUR may be benefitting from its negative correlation to a weaker US Dollar (USD) and has hit a one-year high against the ‘Greenback’.
Strong production growth in the Eurozone’s industrial sector may be continuing to lend support to the Euro today.
Thursday’s data pointed to a 1.5% rise in Eurozone industrial production in February, above the forecast rise of 1%. The figures helped to ease fears of a potential recession in the trading bloc.
EUR may also be underpinned today by persistent bets on additional interest rate hikes from the European Central Bank (ECB). Multiple ECB policymakers have signalled their support for further policy tightening.
These hawkish comments could be undermined by signals today from ECB President Christine Lagarde that Eurozone inflation is steadily declining.
US Dollar (USD) Subdued after Hitting One-Year Lows
The US Dollar (USD) is seeing muted movements today after having nosedived against many of its peers. USD is currently languishing around one-year lows against the Euro and Pound (GBP) amid a risk-on mood.
The ‘Greenback’ may be coming under pressure today from signs that US inflation is steadily cooling. PPI figures on Thursday cooled by more than-forecast which strengthened bets on fewer rate hikes from the Federal Reserve.
Fed policymakers have signalled their support of such a move. This may also be weighing on USD today.
Speaking to Reuters, Atlanta Fed President Raphael Bostic said:
‘Recent inflation data releases are consistent with us moving one more time. We’ve got a lot of momentum suggesting that we’re on the path to 2%.’
EUR/USD Exchange Rate Forecast: Will Cooler Eurozone Inflation Prompt EUR Downturn?
Looking to the coming week for the Euro, a forecast improvement in Germany’s economic sentiment index on Tuesday could push the single currency higher.
However, the final reading of Eurozone inflation for March could see EUR shed any earlier gains on Wednesday. The data is set to confirm an easing of inflation in the Eurozone.
The latest private sector PMIs the Eurozone on Friday are also likely to be a key driver of movement in EUR next week. Private sector performance is forecast to have trended higher in April which could provide a boost to the single currency.
The US Dollar could come under pressure later today if March’s retail sales figures print as forecast. Sales are expected to have continued their decline last month.
On the other hand, a strong reading of April’s consumer sentiment could help to limit any losses for USD if it prints as forecast.
The coming week will see a relatively sparse data calendar for the US Dollar, however. The latest jobless claims figures on Thursday could add to bets on a softer pace of policy tightening from the Fed if they rise as forecast.
April’s private sector PMIs on Friday could have a mixed effect on USD. Private sector performance is set to slide which could pull the US Dollar lower.
