EUR/USD Moves Higher on Inflation Prints and Taper Talk
- The euro rises against the dollar, trades near $1.19 at its weekly high
- The US dollar is lower across the board, including against the Swiss franc and the British sterling
Weaker US Dollar Lifts the Euro
The EUR/USD exchange rate moved higher for a fourth straight day on Wednesday. Meanwhile, currency traders and money managers parsed the latest eurozone inflation report. Indeed, growing tapering discussions also helped buoy the exchange rate as the weaker US dollar lifted the euro higher.
Wednesday’s trading session was favorable for the EUR/USD pair as it gained around 40 pips, or 0.4%, to a closing level of 1.1840.
The euro has been in a steep uptrend against the greenback over the past two weeks. Since the euro reached a six-month low of 1.1695 against the dollar on August 20, the native European currency has risen nearly 200 pips, or more than 1.5% to levels above 1.1850 for a dollar.
The rally was supported by the Federal Reserve’s intention to scale back its extraordinary monetary support of $120bn in monthly asset purchases. Consequently, the US dollar lost further ground last Friday when Fed Chair Jerome Powell signaled the US central bank will not move quickly to hike interest rates even if the asset purchases are reduced this year.
On the other side of the Atlantic, inflation data released Tuesday showed consumer prices in the eurozone rose 3% in August. Thus, surpassing the European Central Bank’s target of 2%. The higher inflation print surprised most analysts. In fact, the latter had predicted inflation in the 19-member euro area would rise 2.7% over the past month.
On Thursday, the euro remains well-bid against the US dollar. The currency pair is now hovering near 1.1845, relatively flat on the day.
USD Slips Against Other Currencies
The US dollar is trading lower against other currencies this week, including the Swiss franc and the British pound. The USD/CHF is currently trading flat near 0.9160 after two consecutive days of moderate losses.
The GBP/USD is on pace to extend yesterday’s gains as its presently trading near 1.3780, following Wednesday’s gain of about 15 pips.
On Friday, traders will be looking toward the latest jobs and unemployment report to find out if the labor market will continue to expand. The nonfarm payrolls release will most likely increase the volatility among currencies.