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EUR/USD Trades Lower on Rumors Regarding the ECB’s Inflation Forecast

June 7, 2017 at 14:11 by Simon Mugo

One euro coinThe EUR/USD currency pair today retreated from its daily highs based on rumors that the European Central Bank would downgrade its inflation forecast at tomorrow’s meeting. The currency pair had risen to a new daily high earlier in the day’s session despite the soft German data released by the Federal Statistical Office, but quickly retraced most of its gains due to the rumor.

The currency pair lost over 70 points at the height of its decline from a daily high of 1.1279 to hit new daily lows after the rumor started circulating.

The currency pair rose to a high despite the release of weak German factory orders for April, which declined by 2.1% versus the expected 0.3% contraction. The factory orders rose by 3.5% when compared to a similar period last year missing the market expectation of a 4.7% increase.

The rumor that the ECB would cut its inflation outlook for the period up to 2019 triggered a massive sell-off of the single currency as the US dollar strengthened against the euro. The rumor also indicated that the bank might raise its real GDP growth outlook for the same period by 0.1%. The euro weakened against the greenback when it became clear that the ECB might not  taper its quantitative easing program in the near future.

The currency pair’s future performance is likely to be affected by the ECB’s rate decision tomorrow as well as Mario Draghi‘s press conference. James Comey‘s testimony before the Senate Intelligence Committee might also affect the currency pair’s performance.

The EUR/USD pair was trading at 1.1260 as at 14:07 GMT having rallied from a daily low of 1.1201. The EUR/JPY was trading at 123.29 having rallied from a low of 122.59.

If you have any questions, comments, or opinions regarding the Euro, feel free to post them using the commentary form below.

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