Euro Moving Higher Amid Weak Dollar

Market Reviews

The euro is growing against the background of the weakness of the US dollar and with the news of the agreement on the formation of the Italian government. The EUR/USD pair increased by 0.39% to 1.1988, having recovered from last week’s lows of 1.1821 (the lowest level since late December). The British pound is also steady. Meanwhile, the US dollar, Japanese yen and New Zealand dollar remain weak. The dollar is also staying in correction against other major currencies.

Against the backdrop of the absence of any economic data from the Eurozone, the focus of investors' attention was the comments of ECB representative Sabine Lautenschlaeger. The politician noted that the dynamics of the economic indicators of the Eurozone continues to remain within the forecasts of the ECB, in connection with which it is calm enough. The politician also added that she is confident in the basic inflationary trends.

Francois Villeroy de Galhau (ECB Governing Council member, Bank of France Governor) stated today, that the current slowdown in inflation is clearly temporary, and Eurozone CPI is awaited to strengthen. According t the politician, the ECB is currently approaching to QE program end.

The US dollar weakened, with the dollar index declining for the fourth consecutive session on Monday, continuing the deviation from new highs in 2018 (93.50). Last week, the fall of the dollar accelerated on weak inflation data for April. Additional pressure on the dollar could be exited by the US from a nuclear deal with Iran. At the same time, the yield of 10-year Treasuries remains above the 2.95% mark.

Also, investors were following closely today the comments of the member of the Open Market Committee of the US Federal Reserve, Loretta Mester, who said during today's speech that the Fed may have to make its monetary policy more restrained. She also noted that improving economic prospects is an argument in favor of further increases in rates.

In May’s Monthly Oil Market Report, OPEC rated both 2018 oil supply and demand forecasts. For 2018, oil demand growth is forecast to grow by around 1.65mb/d to average 98.85 mb/d from 25tb/d. Non-OPEC supply growth was revised up by 0.01mbs in 2018 to 1.75mb/d, averaging 59.62mb/d in total. Meanwhile, OPEC production increased by 12tb/d to average 31.93mb/d in April.