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Euro US Dollar (EUR/USD) Exchange Rate Steady as Risks to Eurozone Economy Remain Broadly Balanced

July 12, 2021 - Written by John Cameron

EUR/USD Exchange Rate Rangebound Despite Expectations of an ‘Intense’ Eurozone Economic Recovery

The Euro US Dollar (EUR/USD) exchange rate held steady today due to a lack of any notable Eurozone economic data. The pairing is trading around $1.18 at the time of writing.

European Central Bank (ECB) vice president, Luis de Guindos, commented today that the Eurozone’s inflation would be on the rise until the end of the year, while risks to the bloc’s growth remain broadly balanced.

De Guindos was previously optimistic about the Eurozone economy, however, saying that he sees an ‘intense’ rebound in economic activity in the second half of 2021.

EU economics commissioner Paolo Gentiloni however warned:

‘The spread of the delta variant is a stark reminder that we have not yet emerged from the shadow of the pandemic.

‘I am not seeing now at the horizon new restrictions substantially coming all around Europe.’

However, some Euro investors are confident that the European Unions (EU) widespread vaccination efforts could keep hospitalisations low, allowing important sectors of the Eurozone’s economies to reopen.

As a result, we could see the EUR/USD exchange rate head higher as the outlook for the Eurozone economy remains largely positive, despite concerns over the spread of the Delta variant of the coronavirus.

US Dollar (USD) Exchange Rate Steady as US Markets Await Inflation Data

The US Dollar (USD) held steady today as demand for the safe-haven currency remains high because of growing concerns over a possible slowdown in the global economic recovery.

However, in the absence of any influential US economic data today, ‘Greenback’ traders are instead turning to this week’s publication of the latest inflation data.

Shinichiro Kadota, a senior financial strategist at Barclays, comments:

‘If we see strong data, the Fed could bring forward their projection for their first rate hike further from their current forecast of 2023. That would also mean they have to finish tapering earlier.’

As a result, USD investors will eye the latest US inflation data to see if this influences the Federal Reserve’s monetary policy going forward.

If the Fed becomes more bullish, however, then we could see the USD/EUR exchange rate fall as risk sentiment improves and demand for the safe-haven USD diminishes.

US Dollar traders will await today’s speech John C. Williams, the president of the Federal Reserve Bank of New York.

Could a more bullish statement about the outlook for the US economy see the USD/EUR exchange rate head higher?

EUR/USD Exchange Rate Forecast: German Inflation Data in Focus

Euro (EUR) investors will be eyeing tomorrow’s harmonised German consumer prices data for June.

Any improvement in the outlook for the Eurozone’s economy would see the EUR/USD exchange rate head higher.

However, with rising cases of the Delta coronavirus variant throughout the EU, we could see single currency investors become more cautious about the outlook for the bloc’s economy.

US Dollar (USD) traders will monitor tomorrow’s release of the latest inflation data for June. Could rising inflation limit the appeal of the safe-haven ‘Greenback’?

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