Single Currency Slightly Higher, Despite Weak Eurozone Inflation

Forex News

Euro rises against the US dollar, despite weak Eurozone inflation. The EUR/USD pair is trading at 1.1992, having gained 0.35%. Official figures show that inflation across the 19-country of the Eurozone eased during April. Eurostat (the European Union's statistics agency) said its headline measure of consumer price inflation dipped to 1.2% yoy in April from 1.3% the month before. That means inflation slipped further away from the ECB's goal of achieving a rate of just below 2%.

The EU says in its spring economic forecast that growth should be a robust 2.3% this year and only ease slightly to 2.0% in 2019 for both the 28-nation bloc and the 19-member Eurozone of members sharing the same currency. At the same time, the European Commission expects that inflation in the euro area will accelerate to 1.6% in 2019 from 1.5% this year.

The Fed acknowledged a recent pick-up in inflation, but gave no indication that it will accelerate the pace of rate increases in response. The statement did little to alter market expectations that the Fed will deliver its second rate increase of the year when it meets in June. Considering that inflation is moving closer to the Fed’s 2% target, there is a stronger likelihood that the Fed will upgrade its rate projection from three to four hikes in 2018. The odds of a fourth rate hike this year stand at 50%.