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Euro US Dollar (EUR/USD) Exchange Rate Flat Ahead of US GDP

May 30, 2019 - Written by John Cameron

Euro US Dollar (EUR/USD) Exchange Rate Muted as China Accuses US of ‘Naked Economic Terrorism’

The Euro US Dollar (EUR/USD) exchange rate remained muted and the pairing is currently trading at an inter-bank rate of $1.1137.

On Thursday, a senior Chinese diplomat stated that provoking trade disputes is ‘naked economic terrorism’.

The safe-haven US Dollar remained muted against the Euro as the US-China trade tensions rumbled on without signs of ending.

On Thursday, in an editorial, the state-run China Daily newspaper stated:

‘It would be naïve to think that China does not have other countermeasures apart from rare earths to hand.

‘As Chinese officials have reiterated, they have a ‘tool box’ large enough to fix any problem that may arise as trade tensions escalate, and they are ready to fight back ‘at any cost’.’

Euro (EUR) Flat as Spanish Inflation Eases to 16-Month Low

On Thursday, data revealed that Spanish retail sales rose by a higher-than-forecast 1.1% in April.

However, the National Statistics Institute (INE) downwardly revised March’s preliminary rise of 1.7% down to 1.4%, which likely weighed on the Euro.

Meanwhile, Spain’s Consumer Price Index (CPI) eased to the lowest level in nearly one-and-a-half years.

Flash annualised CPI rose by a lower-than-forecast 0.8% in May, which likely dampened sentiment in the single currency.

However, month-on-month inflation rose by 0.2% despite forecasts suggesting CPI would stagnate in May.

European Union to Start Disciplinary Actions against Italy

Meanwhile, on Wednesday the European Central Bank (ECB) highlighted a long list of vulnerabilities in its biannual Financial Stability Report.

Growth in the Eurozone has slowed sharply and a global trade war could dampen business sentiment further.

In its report, the ECB stated:

‘Challenges to financial stability increase amid downside risks to the economic outlook. Should downside risks to growth materialise, financing costs for vulnerable sovereigns are likely to increase which may unearth debt sustainability concerns.’

Meanwhile, the European Union is expected to start disciplinary steps against Italy next week for breaking fiscal rules.

This comes despite Italy siting on one of the largest debt piles, which likely further dampened sentiment in the single currency.

Euro US Dollar Outlook: Will Disappointing German CPI Weigh on EUR?

Looking ahead to this afternoon, the US Dollar (USD) could rise against the Euro (EUR) following the release of the US flash GDP.

If data reveals that the US economy has expanded more than forecast in the first three months of the year, sentiment in the US Dollar could rise.

Meanwhile, looking towards Friday the single currency could slide following the release of the German flash Consumer Price Index (CPI).

If CPI does not rise as high as expected in May, the Euro US Dollar (EUR/USD) exchange rate could slide.

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