EUR / USD exchange rate levels, resumes an upward trajectory

The euro US dollar (EUR / USD) exchange rate leveled out this morning as the US dollar (USD) started to gain strength; before resuming its upward trajectory. The US dollar index suffered its biggest one-day loss since May on Wednesday, as the benchmark 10-year US Treasury bond yield fell nearly 3%.

As of this writing, EUR / USD is trading at $ 1.1618, slightly higher from today’s opening levels.

US Dollar (USD) Tapered As Markets Summarize Inflation, FOMC Minutes Says

The US dollar (USD) is down against the majority of its peers this morning, although rising bond yields are providing support. The ‘Greenback’ finds guidance on investor response to yesterday’s inflation and Federal Open Market Committee (FOMC) minutes.

Ahead of the minutes, the USD fell from a one-year high as Treasury yields fell after US inflation data, although it showed prices had risen steadily in September, pushing forward expectations of Federal Reserve tightening.

The FOMC minutes did not rule out the idea of ​​a tapering in November: however, while some members are for more aggressive tapering, others warned that the standard of substantial progress towards the maximum employment goal had not yet been met.

Nonetheless, all participants agreed that if overall progress continues as planned, a moderation in the pace of asset purchases may be warranted “soon”, starting in mid-November or mid-December.

Inflation worries the somewhat subdued forecast: Some participants suggested that inflation could remain high in 2022 if labor and other shortages persist.

Fed official Michelle Bowman gave a speech early this morning, warning that

“The shutdown of economic activity for such a long period has had lasting consequences, and expectations of a smooth resumption of production, transportation and business operations may not be met for some time.”

Euro (EUR) weakens as risk appetite falters

The euro (EUR) is trading in a mixed range this morning as the lack of data leaves the single currency exposed to losses.

The weakness of the US dollar is supporting the rise of the euro, due to the strong negative correlation between the two currencies – meanwhile, accommodating comments from the European Central Bank (ECB) weigh on trade sentiment.

According to Andrea Enria, Senior Advisor to the ECB, caution is in order as the global economy recovers – Enria has drawn particular attention to “property vulnerabilities in some countries”.

Chinese real estate companies’ dollar stocks and bonds fell again this morning as investors worried about a debt crisis: Evergrande Group appeared to be making small strides as Qumei Home Furnishings announced it would buy Evergrande’s 40% stake in their joint venture.

However, other Chinese developers have now warned they could default, dampening investor optimism. According to Zhiwei Zhang, chief economist at Pinpoint Asset Management:

“The most important policy in the real estate sector is not monetary policy, but regulation of indebtedness and the provision of bank loans… I think the government always has the option of relaxing these policies… The big question is whether they are ready to do it. ‘

Euro-US Dollar Exchange Rate Forecasts: Will US Data Lower the Exchange Rate?

Looking ahead, jobless claims in the United States and the producer price index (PPI) for September this afternoon are in the spotlight. If initial jobless claims fall at the start of the month as expected, the US dollar may find some support.

Meanwhile, a lack of data from the EU throughout the session means euro trading is likely to be influenced by risk appetite and ongoing political developments.