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Could stronger Eurozone inflation prompt a euro rally?

business-articlesCould stronger Eurozone inflation prompt a euro rally?
  • Euro fails to capitalise on German inflation uptick
  • Political speculation drives pound weakness
  • Canadian dollar stalls before GDP data
Higher Eurozone inflation could shore up euro
Although the headline German consumer price index surprised markets with an uptick from 1.4% to 1.6% this was not enough to boost the euro yesterday.
Even so, if this afternoon’s Eurozone consumer price index data shows a similar improvement on both the month and the year this could offer EUR exchange rates a rallying point.
Higher levels of inflationary pressure within the currency union would reduce the need for the European Central Bank (ECB) to cut interest rates, diminishing the odds of imminent policy action.
Conversely, if inflation fails to show further signs of picking up this could see the single currency extend its recent downtrend.
Brexit anxiety continues to dominate pound outlook
With no change expected for the finalised first quarter UK gross domestic product the potential for GBP gains is limited.
However, any negative revision to the growth data could see GBP exchange rates come under additional pressure.
Ongoing political speculation is also likely to limit the appeal of the pound ahead of the weekend, with markets still wary of the potential for a no-deal Brexit despite recent comments from Boris Johnson.
Johnson implied that the chances of the UK leaving the EU without a deal is a ‘million-to-one against’.
April GDP uptick to boost Canadian dollar
As oil prices struggled to push higher yesterday, in spite of the ongoing tensions between the US and Iran, the Canadian dollar traded in a narrow range.
However, CAD exchange rates could find a rallying point on the back of today’s Canadian gross domestic product report.
Forecasts point towards growth in April accelerating from 1.4% to 1.5% on the year, suggesting a greater level of resilience within the economy.
A stronger showing here would further limit the odds of the Bank of Canada (BOC) cutting interest rates in the near future, giving investors fresh incentive to buy into the Canadian dollar.
Upcoming Data:
Friday, 28th June 2019
09:30 GBP Gross Domestic Product
10:00 EUR Eurozone Consumer Price Index
13:30 CAD Gross Domestic Product
Philip McHugh

Philip McHugh

Joining the corporate trading desk in 2007, Phil now over sees all of Currencies Direct’s corporate dealing activity. Having gained experience working with hundreds of businesses to optimise international payments processes and execute comprehensive risk management strategies, Phil currently works with a portfolio of corporate clients whilst managing Currencies Direct’s overall market exposure

Phil has FCA approval and has completed the Certificate in International Treasury Management (CertiTM)

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