Euro US Dollar (EUR/USD) Exchange Rate Fluctuates as Recession Fears Recede
The Euro US Dollar (EUR/USD) exchange rate is trading narrowly this morning as German business confidence beats expectations, subduing recession concerns.
At time of writing, the EUR/USD exchange rate is around $1.0635, relatively unchanged from this morning’s opening levels.
Euro (EUR) Undermined by Ukraine Conflict Fears
The Euro (EUR) exchange rate is moderately supported by an improving business confidence in Europe’s largest economy. The German IFO Business Climate survey saw a better-than-expected improvement in confidence as more businesses look to be more confident looking forward.
However, lending some modest support to the single currency is that German inflation showed no signs of easing as it climbed to 8.7%. With both energy and food prices remaining sky-high due to the Ukraine conflict, EUR investors could be buoyed at the prospect of further rate hikes to bring inflation down. Commerzbank’s Chief Economist Joerg Kraemer commented on the data:
‘There has been no clear downward trend in inflation since the autumn. The European Central Bank should continue to raise its key interest rates decisively.’
But the Ukraine conflict shows no signs of stopping, and in turn, continues to weigh on the Euro. With US Joe Biden irking Moscow with his surprise visit to Kyiv, and reports of China supplying military assistance to Russia, concerns over the conflict escalating could be paring gains.
US Dollar (USD) Supported by Safe-Haven Flows
Meanwhile, the US Dollar is finding moderate success with a cautious market mood. Despite a lack of economic data, as well as investors awaiting the FOMC minutes this evening, the ‘Greenback’ is relatively quiet.
However, with an increasingly cautious market mood, safe-haven currencies such as the US Dollar are benefitting. Uncertainty surrounding the tightening cycles of central banks are weighing on market sentiment. Despite inflation softening across the board, diverging policies are spooking investors.
Elsewhere, geopolitical tensions are also weighing on the mood. As US-Sino relations continue to simmer as reports emerge of China planning to assist Russia in their ongoing invasion.
Euro US Dollar Exchange Rate Forecast: FOMC Minutes to Rally the Greenback?
Looking ahead, the Euro US Dollar exchange rate could see further movement with the release of the FOMC minutes from the last policy meeting. Uncertainty surrounds the Federal Reserve’s next move, deterring investors from making moves. However, indications on how the central bank will continue its monetary policy could lift USD investors if a hawkish tone is struck.
Meanwhile, the Euro could remain under pressure with developments out of Ukraine. Fears of the conflict escalating could keep downward pressures on the single currency. That is until the latest inflation data is released tomorrow. An expected easing to 8.6% could pare rate hike bets from the European Central Bank (ECB), dragging the Euro down.