financetom
Euro-Dollar
financetom
/
Forex
/
Euro-Dollar
/
Euro-Dollar Potentially Biggest Mover on U.S. Inflation Undershoot
News World Market Environment Technology Personal Finance Politics Retail Business Economy Cryptocurrency Forex Stocks Market Commodities
Euro-Dollar Potentially Biggest Mover on U.S. Inflation Undershoot
Mar 22, 2024 2:18 AM

Image © European Union - European Parliament, Reproduced Under CC Licensing.

The Euro to Dollar exchange rate looks to build on this week's recovery but will need U.S. inflation to undershoot in order to advance above 1.10.

Euro-Dollar trades at 1.0968 at the time of writing, helped by a broader pullback in the U.S. Dollar that comes in sympathy with an optimistic tone on global equity markets.

"Improved risk appetite weighed on the USD," says Joseph Capurso, a foreign exchange market strategist with Commonwealth Bank.

Capurso says the Euro-Dollar could be one of the bigger winners in global FX if U.S. inflation undershoots expectations.

"Financial markets have been very sensitive to even small misses in the CPI in recent months," he explains in a daily note.

"For example, the 0.1pp miss in the October core CPI caused the USD to slump by 1.5% and US Treasury yields to fall by around 20bp across the curve," he adds.

Consensus looks for core CPI inflation to have increased by a strong 0.3% month-on-month in December, but Commonwealth Bank considers the risk of a below‑consensus outcome for the core CPI as greater than the risk of an above‑consensus outcome.

"Therefore, the USD could ease further today; a fall of 1% or more is possible. As the major alternative to the USD, we expect EUR to be the largest winner from possible USD weakness," says Capurso.

Analysts at private swiss bank J. Safra Sarasin meanwhile caution that the Euro's near-term strength is unlikely to sustain.

"The euro has rallied on the back of a compression of the dollar-euro yield differential. Yet we think the recent move looks a bit overdone as the euro area continues to be in a weak cyclical position," says Claudio Wewel, FX Strategist at J. Safra Sarasin.

Wewel expects Euro-Dollar to return above 1.10 by the fourth quarter of the year when the global economic recovery gathers traction.

"Euro support should improve as we expect a moderate recovery of private consumption in the euro area. The stabilisation of Chinese growth should further support the euro, given the high exposure of the euro area manufacturing sector to China," he says.

Comments
Welcome to financetom comments! Please keep conversations courteous and on-topic. To fosterproductive and respectful conversations, you may see comments from our Community Managers.
Sign up to post
Sort by
Show More Comments
Related Articles >
The EURUSD price loses momentum – Forecast today - 24-10-2024
The EURUSD price loses momentum – Forecast today - 24-10-2024
Oct 26, 2024
The EURUSD price touched 1.0780$ level and found solid support there, to show some slight bullish bias, affected by stochastic positivity that loses its positive momentum clearly, which supports the chances of resuming the negative trades in the upcoming sessions, as it moves within bearish channel that has negative targets that extend to 1.0700$ followed by 1.0670$. Therefore, we expect...
The EURUSD price forecast update - 22-10-2024
The EURUSD price forecast update - 22-10-2024
Oct 26, 2024
The EURUSD price shows some slight bullish bias now, affected by stochastic positivity, but as long as the price is below 1.0880$, our bearish overview will remain valid for today, supported by the negative pressure formed by the EMA50, reminding you that our targets begin at 1.0780$ and extend to 1.0700$ after breaking the previous level. The expected trading range...
The EURUSD price approaches the target – Forecast today - 23-10-2024
The EURUSD price approaches the target – Forecast today - 23-10-2024
Oct 26, 2024
The EURUSD price resumed its negative trading to approach our waited target at 1.0780$, reinforcing the expectations of continuing the domination of the bearish trend, reminding you that breaking this level will push the price towards 1.0700$ as a next negative station. The EMA50 keeps supporting the suggested bearish wave, reminding you that breaching 1.0880$ will stop the negative scenario...
The EURUSD price forecast update - 24-10-2024
The EURUSD price forecast update - 24-10-2024
Oct 26, 2024
The EURUSD price is testing the bearish channels resistance line that appears on the chart, and as we mentioned this morning, the price needs to hold below 1.0800$ to keep the negative scenario valid for the upcoming period, which its targets begin by breaking 1.0780$ to confirm opening the way to head towards 1.0700$ as a next station, reminding you...
Copyright 2023-2024 - www.financetom.com All Rights Reserved