The EUR USD exchange rate could become increasingly volatile in the near-term with Germany’s inflation figures due today as well as the US core personal consumption expenditure price index (PCE).
Beyond this, market demand for the ‘Greenback’ has diminished on discussions regarding who will be replacing Janet Yellen as Chairman of the Federal Reserve, with Jerome Powell now appearing to be the most likely candidate.
German Inflation Imminent – EUR USD Exchange Rates Liable to Stumble
Germany’s consumer price index (CPI) figures are due today, with a fall forecast in the preliminary year-on-year estimate from 1.8% to 1.7% in October.
The month-on-month inflation figure is expected to remain steady at 0.1% in October.
Notably, Germany’s regional CPI’s were released earlier this morning, reflecting a rather gloomy picture of what can be expected for the German inflation report, with North Rhine Westphalia demonstrating an inflation print of 0.0%, down from the 0.1% previous and Hesse demonstrating a -0.2% contraction, down from the 0.3% gain previous (amongst many other poor prints).
If the readings disappoint then the single currency could come under significant pressure, with Germany being the Eurozone’s largest economy and the Eurozone itself continuing to struggle to bolster its own unified inflation print.
Whether this will be enough to shift things back into the ‘Greenback’s’ favour, however, is questionable – with markets still digesting the possibility that US Fed monetary policy could be altered with the nomination of Jerome Powell as Chairman.
USD Exchange Rate Limited by Possibility that Jerome Powell will be New Fed Chairman
The near-term outlook for the US Dollar remains limited by conjecture regarding who will be replacing Janet Yellen as Chairman of the Federal Reserve.
US President Donald Trump is due to depart on his trip to Asia on the 3rd of November, having previously asserted that he will make the final announcement before leaving.
Federal Reserve Governor Jerome Powell is now deemed the most likely candidate according to reports in the US today – an eventuality that would allow Powell significant influence over interest rates and economic policy as a whole.
In this sense, Trump’s nomination has the potential to massively alter market expectations regarding future Fed policy, a prospect that has markets worried.
Treasury Secretary Stephen Mnuchin claimed in September that the Whitehouse is ‘less concerned about inflation at the moment’ – suggesting that President Trump could be looking for a dovish candidate that will keep interest rates stable.
If this proves true, and Powell does reflect this sentiment then market demand for the ‘Greenback’ will likely tumble.
US PCE and Personal Income Data Imminent – EUR USD Could Come Under Pressure
Today’s run of US data prints will feature the US personal income figures for September, as well as the spending figures and the PCE price index.
Personal incomes in the US are currently forecast to climb month-on-month in September from 0.2% to 0.4%, with personal spending expected to follow suit by climbing from 0.1% to 0.9%.
The year-on-year core PCE price index is expected to remain steady at 1.3%.
If personal income in the US demonstrates a rise as forecast then the EUR USD exchange rate could come under increasing pressure, though markets will be predominantly concerned with today’s German inflation print, which will follow shortly after.
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