Euro to US Dollar (EUR/USD) Exchange Rate Dependant on US CPI Figures
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Session highs of 1.3529 have been reached, whilst falling to lows of 1.3476.
The Euro has been trading highly for sometime against other major currency peers, with economists speculating that President for the European Central Bank (ECB), Mario Draghi, will need to introduce further unconventional methods to control the strong Single Currency in an attempt to aid the recovery of the Eurozone.
Draghi commented: ‘In the present contact, an appreciated exchange rate is a risk to the sustainability of the recovery.’
The Eurozone has suffered whilst attempts to bring the currency down have failed. An industry expert, Jeffery Rosenberg, has commented on the paradox: ‘When they take actions to stabilise the Eurozone (do whatever it takes), and that entails zero interest rates and flooding markets with liquidity and narrowing the peripheral to core country interest rate differentials… that might suggest a lower value of the Euro. That brings more demand for Euro-denominated assets and hence more demand for the Euro.’
The Single Currency however, is currently predicted to reach a six-year pinnacle against the Japanese Yen (JPY) by the close of 2014. Economists have suggested that the lethargic production of money printing in the Eurozone, is falling behind the rate that the Bank of Japan (BOJ) is operating at.
Daiwa Securities forex expert, Yuji Kameoka, has commented: ‘Europe’s monetary base continues to be significantly smaller because even as the ECB eases, it’s not buying assets like the BOJ.’
Conversely the US Dollar is eagerly anticipating the release of the Consumer Price Index on Tuesday afternoon. The inflation figures are expected to remain at 2.1% in June, as they did in May, year on year.
A representative for Barclays has commented: ‘An above-consensus outcome (in US consumer inflation for June, due on Wednesday) could increase US rate hike expectations.’
With US interest rate hikes hot topic in the currency market, economists and investors alike are awaiting US figures as an indication that hikes could be approaching. Chairwoman for the Federal Reserve, Janet Yellen, recently commented that interest rate hikes would be fuelled by a string of positive data. Employment data in particular will signal the sign of a stronger economy able to sustain interest rate hikes.
Thursday will see the US publish the Continuing Claims and Initial Jobless Claims figures, which are currently forecast to unfavourably rise above previous levels. Eurozone Consumer Confidence data will be released on Wednesday, which is predicted to stagnate at -7.5. Thursday will see the release of various PMI data for the Eurozone, which is forecast to prove unfavourable.
For now the Euro is waiting for the US CPI figures to reach publication, in a hope that favourable US data will pull the Euro down from its high position. However, if the US doesn’t produce upbeat figures, the strong Euro may battle further in the currency market.
The USD to EUR exchange rate is currently trending at 0.7418.