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Euro Plummets to 16-Month Low Ahead of US Consumer Test

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Euro Plummets to 16-Month Low Ahead of US Consumer Test

The euro has plummeted to a 16-month low on Tuesday while the US dollar remained steady as traders awaited U.S. retail sales data. Many Forex traders are wary a strong reading could stoke inflation and add pressure on the US Federal Reserve to start lending rates hikes.

Talks between U.S. President Joe Biden and his Chinese President Xi Jinping are also likely to set the tone in the world’s financial markets. Furthermore, currency moves were slightly ahead of any outcome from the discussion.

China’s yuan presently remains steady at 6.3812 per US dollar offshore.

Overnight the eurodollar tanked below US$1.14 for the first time since July last year. Above all, amid concerns over COVID-19 outbreaks and as Europe’s central bank chief pushed back against the need to act to tame growing inflation.

Reuters reports the common currency steadied at $1.1361 after falling as far as $1.1356 on Monday and the drop helped the U.S. dollar index to a 16-month high of 95.595. The dollar was also firm against the yen overnight and broadly steady elsewhere.

It last bought 114.14 yen while the euro sat near the one-month low of 129.64 yen it touched on Monday.

“If we were to take any tightening measures now, it could cause far more harm than it would do any good,” European Central Bank President Christine Lagarde had told European Union lawmakers, a contrast with hawkish hints from elsewhere.

“We expect the cautiousness of the ECB on policy to limit recovery prospects for the euro against the dollar in the coming months,” said Rabobank senior FX strategist Jane Foley.

“Our current mid-2022 forecast of EUR/USD at $1.14 is looking outdated … we will be revising our forecasts later in the week.”

Source: Reuters

Also read: Binance Ends Crypto Margin Trading of Pound, Aussie Dollar, Euro


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