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Euro (EUR) Exchange Rate Falls to Multi-Month Low after US Rate Bets Surge

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The Euro (EUR) exchange rate declined to an eight-month low against the US Dollar (USD) during Tuesday’s European session.

A lack of pertinent economic news from the Eurozone had limited Euro movement for much of the day, but the Euro to US Dollar (EUR/USD) exchange rate hit a low of 1.3457 as investors digested the US Consumer Price Index.

The pairing had previously been trending around 1.3530.

As expected by economists the US Consumer Price Index printed at 0.3% in June, month-on-month, and rose by 2.1% on the year.

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Consumer prices excluding food and energy advanced by slightly less-than-expected, up by 0.1% in June month-on-month rather than the 0.2% expected. On the year June’s CPI Ex food and energy rose by 1.9%. A 2.0% year-on-year climb had been forecast.

The data supported the case for the Federal Reserve bringing forward the timeline for increasing interest rates and helped the US Dollar broadly strengthen.

The increase in inflation also serves as a reminder of the widening divide between price pressures in the Eurozone and US.

While the level of consumer price inflation in the US is now in the region of the Federal Reserve’s target, the Eurozone has had to deal with persistently low levels of inflation for some time.

The Euro (EUR) exchange rate fluctuated before settling around 0.4% lower against the US Dollar.

Before the data was published industry expert Brad Bechtel observed; ‘The market is completely ignoring the European news. So when the Dollar moves, it’ll move, but anything European-specific is not enough. Euro-Dollar is also seemingly ignoring all geopolitical noises’.

The currency bloc has been buckling under the threat of deflation for some time and if prices don’t start climbing soon the European Central Bank may have to bring in additional stimulus measures.

Other US reports showed that the US House Price Index jumped by 0.4% in May, month-on-month, double the 0.2% monthly gain anticipated and following a positively revised increase of 0.1% in April.

The Federal Housing Finance Agency also stated that prices were up 5.5% on the year.

The Euro to Pound (EUR/GBP) exchange rate was also softer ahead of the release of minutes from the Bank of England’s last policy meeting.

If the minutes show that any of the central bank’s policy members voiced support for an interest rate hike, the Pound may spike tomorrow.

So far this week economic reports from the Eurozone have been few and far between. Tomorrow, however, sees the publication of the Eurozone’s Consumer Confidence Index for July.

Economists have forecast a reading of -7.5, unchanged from June’s level. A surprise result could spark Euro (EUR) exchange rate volatility.

Euro Exchange Rates

Currency   Currency Rate
Euro Pound Sterling 0.7895
Euro US Dollar 1.3467
Euro Canadian Dollar 1.4462
Euro Australian Dollar 1.4320
Euro New Zealand Dollar 1.5541
US Dollar Euro 0.7417
Pound Sterling Euro 1.2660
Canadian Dollar Euro 0.6914
Australian Dollar Euro 0.6985
New Zealand Dollar Euro 0.6436
As of 15:10 GMT

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