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Euro US Dollar (EUR/USD) Exchange Rate Muted as May’s US Inflation Disappoints

June 12, 2019 - Written by John Cameron

Euro US Dollar (EUR/USD) Exchange Rate Flat as US CPI Barely Rises

The Euro US Dollar (EUR/USD) exchange rate remained flat and the pairing is currently trading at an inter-bank rate of $1.1317.

The US Labour Department said on Wednesday that its Consumer Price Index (CPI) barely rose in May.

CPI excluding food and energy edged up by 0.1% between April and May, and year-on-year inflation rose by a lower-than-forecast 2%.

Meanwhile, headline CPI was left at 1.8% in May which likely dampened sentiment in the ‘Greenback’.

A rebound in the price of food was offset by cheaper fuel prices, which may increase pressure on the Federal Reserve to cut interest rates.

Reports suggest that due to the recent language shift in the Fed, next week’s FOMC minutes could be used to signal an easing bias.

Euro (EUR) Muted as Trade Tensions Biggest Threat to the Global Economy

Meanwhile, European Central Bank (ECB) policymaker and Governor of the Bank of France, Francois Villeroy de Galhau said the bank is prepared to act further if the economic slowdown takes a turn for the worse.

He noted that the biggest threat to the global economy was the current uncertainty over trade tensions between the US and China.

Speaking to French television channel CNews, Bank of France Governor said:

‘If the current slowdown becomes a real slamming of the brakes, we can do more than we are doing currently.’

However, he noted that it was up to politicians to resolve the current trade tensions and that central banks could not do everything to make sure economic growth is strong.

This likely weighed on the single currency, causing the pairing to remain muted on Wednesday afternoon.

Euro US Dollar Outlook: Will German Inflation Weigh on EUR?

Looking ahead to Thursday, the Euro (EUR) could slide against the US Dollar (USD) following the release of Germany’s Harmonised Index of Consumer Prices.

If inflation does not rise as high as forecast in May, it could dampen sentiment in the single currency.

Meanwhile, the US Dollar could edge up against the Euro following the release of the initial and continuing jobless claims.

If the number of Americans claiming unemployment is lower than expected, it could buoy the ‘Greenback’ and cause the Euro US Dollar (EUR/USD) exchange rate to slide.

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