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EUR/USD retests parity in risk-off trade

currency-newsEUR/USD retests parity in risk-off trade
The US dollar trended broadly higher again on Tuesday, bolstered by a gloomy market mood.

Meanwhile, the pound is off to a solid start this morning with GBP/EUR climbing to €1.1881 and GBP/USD buoyed at $1.1890. GBP/CAD stable at C$1.5485, while GBP/AUD and GBP/NZD hold steady at AU$1.7577 and NZ$1.9408, respectively.

The publication of the US consumer price index will undoubtedly be the highlight for investors today. Will another rise in inflation propel the US dollar higher again today?

What’s been happening?

The US dollar opened yesterday’s session on strong footing, with investors continuing to favour the safe-haven currency as global recession fears weighed on market sentiment.

However a technical correction, attributed to a pullback in US Treasury yields then saw the ‘greenback’ relinquish a good portion of these gains with the opening of the US trading session.

The initial uptick in the US dollar, combined with a larger-than-expected plunge in German economic sentiment this month took its toll on the euro on Tuesday and saw the EUR/USD exchange rate come previously close to reaching parity.

However, the single currency was able to bounce back in the latter half of the session amid suggestions the euro was oversold.

The pound, meanwhile, retreated through yesterday’s session, with the political uncertainty surrounding the race to replace Boris Johnson as prime minister leaving investors wary of making any bets on Sterling.

What’s coming up?

Turning to today’s session all eyes will be on the publication of the latest US CPI figures.

Economists forecast today’s release will report US inflation continued to accelerate in June. This may reinforce Federal Reserve rate hike bets and see the US dollar resume its bullish trajectory.

In the meantime, the UK’s latest GDP figures may buoy the pound this morning, after they reported the UK economy grew more than expected in May. 

Also of note this morning will be the publication of the Eurozone’s industrial production figures. Will a slowdown in production growth in May prompt the euro to retest parity with the US dollar today?
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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