Euro Falls on Inflation Speculation; Risk Events Looming

 

USD

The U.S. dollar is mostly on the rise this morning as development’s abroad are weakening the greenback’s counterparts. The exception is the Australian dollar which surged across the board as GDP beat expectations.

There is no major data slated for release today, however, tomorrow is chalked-full of risk events. Early, the European Central Bank will release its interest rate decision. A new report suggests that the central bank may cut its inflation report, weakening the Euro. Then former FBI Director James Comey will testify before Congress. Leaked reports say that Comey will dispute some of the President’s claims but Comey will not say Trump attempted to obstruct justice. If sparks fly, the dollar could come under pressure. Throughout the day, Brits head to the polls for a parliamentary election. Results should start coming in around dinner time on the East coast.

 

EUR 

The Euro is under slight pressure this morning on a report the European Central Bank will cut its inflation outlook later tomorrow. “The ECB is preparing to cut its inflation outlook across its forecast horizon at this week’s meeting because of weaker energy prices,” according to an official. The Euro had surged to near a 9-month high in recent days as some expected the ECB to hold a more hawkish outlook on future policy. Today’s report throws some cold water on that assumption.


Underwhelming German, Spanish and Italian retail sales have added to the Euro weakening.

 

GBP 

The British pound continues to tread water ahead of tomorrow’s snap Parliamentary elections. Tightening polls over the last few weeks have damped down the sterling’s rise from April. We will have a clearer picture tomorrow evening. If the Conservatives are able to add to their majority, even slightly, we expect the sterling to strengthen. If no party comes away with a majority, the resulting hung parliament would spell short-term doom for the currency. We expect this result to be unlikely, but not out of the realm of possibility. Nevertheless, expect heightening volatility on Friday and possibly into early next week.