EUR USD Exchange Rate Fluctuates on Positive US and Italian Inflation Releases

September 14, 2017 - Written by Frank Davies

STORY LINK EUR USD Exchange Rate Fluctuates on Positive US and Italian Inflation Releases

The Euro US Dollar exchange rate fluctuated today with both the US and nations within the Bloc releasing upbeat inflation data.

US Inflation Beats Expectations, USD Bolstered

Year-on-year US consumer prices in the US jumped 1.9% in August, beating both July’s 1.7% increase and the market forecast of 1.8%.

This was their highest reading in three months and was predominantly driven by the rising cost of shelter and gasoline due to the severe damage wrought by storms Harvey and Irma – particularly their shutting down of refineries on the Gulf coast.

The monthly figure also demonstrated a rise, hitting 0.4%, the highest since January and above the forecast of 0.3%.

This news could perceivably increase the chances of a rate hike in December, especially considering the duality of rising inflation and positive employment figures.

Ian Shepherdson, Chief Economist at Pantheon Macroeconomics shared this sentiment, stating:

‘The spell has been broken. A sixth straight soft core would have taken some explaining. If the Fed doesn’t raise interest rates in December a combination of rising inflation and strong job gains -- after the effects of the storms subside -- will compel the central bank to act in March’.

The market reaction to this news was predominantly positive, with the ‘Greenback’ climbing against most of the majors. It did, however, struggle to notably progress against the Euro, which remained bolstered by its own string of positive inflation reports from nations within the Bloc.

EUR Climbs as Nations within the Bloc Demonstrate Positive Inflation Figures

Italy’s consumer prices also flexed some muscle, jumping 1.2% year-on-year in August, inching higher from the 1.1% rise demonstrated in the previous month and matching estimates (a jump primarily caused by the rising cost of transport).

France’s inflation, on the other hand, hit a four-month high in August according to data today from statistics office Insee.

Year-on-year consumer prices in France jumped to 0.9%, beating the 0.7% rise demonstrated in July, whilst the month-on-month figure demonstrated a rise of 0.5% over July’s 0.3% decline.

Combined, this news allowed the Euro to remain somewhat competitive with the US Dollar today, stability perhaps further enabled by the ‘Greenback’ still being weighed down by the ongoing North Korean geopolitical crisis and indeed the storm damage.

EUR USD Forecast: Big Data due Before the Week’s End

The EUR USD exchange rate could prove volatile tomorrow with a whole range of data prints for the US due to release.

The advance retail sales figures for August (a monthly measure of the sales of goods to consumers) and the University of Michigan Confidence Index are the two most notable, though these will be accompanied by US industrial production and business inventory figures.

US retail sales are forecast to have grown by 0.1% in August, down from July’s 0.5% growth, whilst the confidence survey is expected to print at 95, down from the previous period’s 96.8.

In a disappointing trifecta, industrial production, also, is forecast to drop, from 0.2% in July to 0.1% in August.

If these figures do indeed prove disappointing then the Euro may well find the room it needs to capitalise, pushing EUR USD into the Euro’s favour as the trading week ends.

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TAGS: Euro Forecasts