According to analysts, the current development of the exchange value of the euro (EUR), signals its weakening, especially regarding the EUR/USD currency pair. In recent hours this currency pair has seen a strengthening trend of the US dollar (USD), with positive data from the US labor market expected on Friday, 4 June 2021. According to financial strategists, these data will be key to the further development of inflation in the US economy, which has risen dynamically in recent weeks.
On 3 June at 7:12 am CET, the EUR/USD traded on the international foreign – Forex exchange market at a mutual exchange rate of US$ 1.2203 per EUR with the current daily decline of the EUR by -0.05%. This mutual exchange rate was achieved in a situation where the exchange rate of the USD increased, according to data from the US Dollar Currency Index (DXY), which compares the value of USD with six other major world currencies, including EUR. At this time the USD was seen at a price level of 89.98 with a daily gain of +0.08%.
The recent rise in US inflation is likely to be temporary – for the time being – but it could be more permanent in the coming years as more people return to work, said former New York Fed president William Dudley. In recent weeks, inflation has been a major topic for analysts and financial strategists for both commercial and especially investment banks. Investors fear that faster growing consumer prices will force the Federal Reserve to raise interest rates earlier than expected. In April, the US consumer price index rose 4.2% year on year, which was the sharpest increase since September 2008. According to financial analysts and economists, these US data on inflation may to some extent be a warning for Europe and especially eurozone countries. So far the overall inflation rate for May 2021 has been around the ECB’s inflation target of two percent year on year.
However, in the eurozone countries there are significant differences in the inflation rates of individual member states. For example, Luxembourg is showing the largest increase in inflation to 4% whereas Greece reported negative inflation, or so-called deflation of -1.1% p.a. The European Central Bank (ECB) has previously warned that by the end of 2021 this year inflation could exceed its target, which is set just below two percent. After a temporary rise, in the coming years the ECB expects price growth to slow down and to fall below the target value. The ECB’s Governing Council has recently indicated that it does not intend to change anything in the near future regarding its supportive monetary policy of large-scale bond purchases. According to foreign exchange market analysts, these facts suggest a possible continuing decline in the exchange value of the EUR against other currencies and especially against the USD.