Euro strengthens as higher inflation expected in the USA

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Recent developments within the single European currency – the euro (EUR) market have shown how sensitive global investors are regarding the rising inflation in the United States (US). This week global markets are focusing on the latest US inflation data to be released this week. The latest US consumer price index is set for publication on Wednesday, 12 January, and the producer price index is scheduled for Thursday, 13 January. Based on these facts, on Tuesday, 11 January analysts expect European stock prices to rise in addition to the strengthening of the EUR exchange rate.

According to analysts, the growth of the USD exchange rate began to stagnate, also thanks to investors’ expectations regarding the US Federal Reserve System (Fed) chief Jerome Powell’s possible hint on an increase in US interest rates. On 11 January 2022 at 8:01 am CET, according to the US Dollar Currency Index (DXY) we saw the USD at a price level of 95.89, with a daily decline of -0.11%. The global currency pair EUR/USD traded on the foreign exchange – Forex market at a mutual exchange rate of US$ 1.1337 per EUR, with the current daily strengthening of the EUR by + 0.11% the USD.

Global investors will also seek any guidance from the Fed officials on the timing of interest rate increases. The first clue as an indication leading to an estimate of a more accurate date for the increase in bank rates in the USA will happen today, 11 Jan, when a confirmation hearing of the Chairman of the Federal Reserve, Mr. Jerome Powell, will take place. The President of the Fed in Kansas City, Mrs. Esther George, is also to speak, and later in the day, the President of the Fed in St. Louis Mr. James Bullard, will also make a statement. According to economic correspondents, the first increase is expected in May 2022 and will be spread in four successive steps or tranches until November 2022.

The British pound also responded to these facts. The current state of the British economy is still not good due to the ongoing Covid-19 pandemic, but its outlook, unlike many other European countries, is very positive. At the end of last year the Bank of England (BoE) changed its monetary policy when it raised interest rates in the United Kingdom. On 11 January at 8:18 am CET, the British pound (GBP) traded against the US dollar (USD) at a mutual exchange rate of US$ 1.3591 per GBP with a daily gain of +0.12% against the USD. At the time mentioned the EUR also strengthened against the GBP by +0.06% when it traded GBP 0.8344 per EUR.

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