The euro US dollar exchange rate extended gains for a second straight session on Tuesday. The pair closed 0.1% higher at US$1.1111. The euro US dollar exchange rate is advancing in early trade on Wednesday.
The eurozone economic calendar has been sparse so far this week. However, that will change today. Investors have a barrage of eurozone data to digest across today’s session.
German inflation figures will catch the attention of euro investors. Analysts forecast that the German consumer price index (CPI) will decline to 1.1% in October down from 1.2% the previous month. Core inflation, which doesn’t include more volatile items such as food and fuel, is expected to fall to 0.8% down from 0.9%.
Inflation in Germany, Europe’s largest economy, moving away from the 2% target will unnerve the European Central Bank (ECB). The ECB cut interest rates and restarted its bond buying programme in September. Weak inflation will further fuel fears that Germany is tipping into recession. Should this be the case, the ECB could be forced to ease monetary policy further.
Another important macro data release for the euro today will be eurozone consumer confidence. Analysts are expecting household sentiment in the bloc to remain roughly on par with September. Any hints that consumer confidence is falling would suggest that the current manufacturing slump in spilling over in the consumer sector. This would be bad news for the German economy and could further hit demand for the euro.
Hawkish Fed Rate Cut?
The US dollar trended lower in the previous session as investors turned their attention to the US economic calendar.
US consumer confidence unexpectedly fell in October as concerns grew over business conditions and employment prospects. Sentiment in US households dipped to 125.9 missing analysts forecasts of 128. This was the lowest reading since June. Weak household sentiment often results in lower spending. We saw this with weaker retail sales figures last month. This is bad news for the US economy and therefore the dollar.
Today investors will focus on the Federal Reserve monetary policy announcement. Investors are 93% confident that the Fed will cut rates today. Investors will be watching carefully to see whether the Fed will cut again or whether this is the end of the cutting cycle. Investors are divided as to what they believe the Fed will do next. This could mean that the dollar will see heightened volatility around the announcement.
|What do these figures mean?|
|When measuring the value of a pair of currencies, one set equals 1 unit and the other shows the current equivalent. As the market moves, the amount will vary from minute to minute.
For example, it could be written:
1 EUR = 1.12829 USD
Here, €1 is equivalent to approximately $1.13. This specifically measures the euro’s worth against the dollar. If the U.S. dollar amount increases in this pairing, it’s positive for the euro.
Or, if you were looking at it the other way around:
1 USD = 0.88789 EUR
In this example, $1 is equivalent to approximately €0.89. This measures the U.S. dollar’s worth versus the euro. If the euro number gets larger, it’s good news for the dollar.