Euro Is Weakening Slightly As the Dollar Waits for the CPI Report

The larger Euro area currencies have a little advantage over the rest, but the Swiss Franc continues to trail behind. With the big rebound in the DOW overnight, followed by a small gain in the Nikkei, the overall market mood is mildly upbeat. For the time being, the AUD is leading commodity currencies to lower, following RBA Governor Lowe’s cautionary remarks. The dollar is trading in a range and investors are waiting for US CPI data to provide some direction.

Based on a loss of interest in the dollar and traders’ cautious approach ahead of important data releases on the US calendar, EUR/USD improves for the second session in a row, extending the optimism seen in the first half of the week.

The euro’s better note is being bolstered by a significant drop in German 10-year Bond yields to -0.30 percent, levels are last seen in mid-July, and US 10-year note yields to levels closer to 1.35 percent.

In August, the final Spanish CPI grew 0.5 percent month on month and 3.3 percent year on year, while the HICP rose 0.4 percent month on month and 3.3 percent year on year. Later in the NA session, investors will pay special attention to the release of CPI-tracked inflation numbers in the US, with consensus anticipating headline prices to rise 5.3 percent YoY and core prices to rise 4.2 percent.

What To Look For in the EURO Area

In the face of a firm dollar and increasing rates, the EUR/USD managed to conclude Monday’s session with small gains and is now edging higher to the 1.1830 level. With the ECB’s dovish “recalibration” now in the rearview mirror, investors appear to have moved their focus back to inflation fears and the Delta variant’s progress, which, together with Fed taper predictions, is expected to constrain upside potential for the time being.

In the region, there has been an asymmetric economic recovery. The rate of increase in inflation is likely to continue. The Delta version of the coronavirus is progressing, as is the vaccine campaign’s pace. Political effervescence around the Euro Union Recovery Fund is likely.

The upcoming German elections in September may cause some political anxieties in the situation. In the aftermath of the pandemic, investors turn to Euro shares which could provide the single currency a boost amid speculations on the ECB tapering.