The Euro US Dollar (EUR USD) exchange rate continues to be impacted by rising geopolitical tensions today following an ever escalating war of words between the US and North Korea.
Volatility in Currency Markets on North Korea Concerns
The US Dollar was met by further volatility in currency markets overnight on as US President Donald Trump responded to Pyongyang’s recent threats to launch a number of missiles towards the US pacific territory of Guam.
Speaking late on Thursday Trump said that North Korea should be ‘very, very nervous’ if it attempts to act against the US and that the regime would be in trouble ‘like few nations ever have been’ should the two countries clash.
The latest comments have done little to reassure markets, with investors becoming increasingly nervous that the recent sabre rattling could potentially lead to something more if either side presses much further, something which would have massive repercussions for the entire global currency market.
David Madden, analyst at CMC Markets said;
‘The tension between the US and North Korea is still dominating the news and it is looming over the financial markets.’
‘The uncertainty surrounding the situation has been the main driver of the markets recently, and the enormous surge in the volatility index tells us exactly what traders are thinking.’
While most analysts are doubtful that the current spat will actually lead to open conflict, it could still have an adverse impact on markets if it strains US relations with North Korea’s only ally, China, with a potential fallout possibility affecting trade between the world’s two largest economies.
EUR USD Forecast: US Inflation Data to Alter Fed Rate Plans?
Looking ahead the EUR USD exchange rate may strengthen later this afternoon as the US releases its latest inflation report.
Investors will be paying close attention to the data today as lacklustre inflation remains a major concern for policy makers at the Federal Reserve, with the possibility of core inflation remaining flat in July likely to further lower the odds of a rate hike by Fed before the end of the year.
Meanwhile the Euro may strengthen at the start of next week as Germany’s releases its preliminary GDP estimate for the second quarter, with economists forecasting that the Eurozone’s largest economy will have grown at a healthy 0.6% in the April-June period.
Current Interbank Exchange Rates
At the time of writing the EUR USD exchange rate was trending around 1.1755 and the USD EUR exchange rate was trending around 0.8503.