Pure FX Blog

12 October 2017

Euro Hits 3-Week High Versus US Dollar, as Fed Worries Over Inflation

The euro to US dollar interbank exchange rate has hit 1.1870 today, its highest since September 22nd, as the US Federal Reserve is worried over persistently low inflation in America. Image credit: William Lepretre.

The euro to US dollar interbank exchange rate has hit 1.1870 today, its highest since September 22nd, as the US Federal Reserve is worried over persistently low inflation in America. Image credit: William Lepretre.

by Peter Lavelle

Welcome to Pure FX’s latest update of the euro to US dollar interbank exchange rate.

The common currency stands taller versus the greenback! The euro to US dollar interbank exchange rate has hit 1.1870 today, its highest in 3 weeks, or since September 22nd.

The euro has climbed against the US dollar, because in the minutes of the US Federal Reserve’s latest meeting yesterday, the Fed worried that inflation in the USA may stay low.

In particular, the Fed “expressed concern that the low inflation readings this year might reflect not only transitory factors”, said the minutes, thereby weakening the US dollar.

US core inflation, which measures price pressures generated within America, reached just 1.3% in September, well below the Fed’s 2.0% target, thus dragging down the greenback.

This has weighed on the buck, because if inflation stays low in the US, the Federal Reserve may be less likely to lift interest rates, above their current 1.00-1.25%!

Euro rises, as Catalonia suspends independence move

Moreover, the euro has also risen against the US dollar, because rich Spanish province Catalonia has suspended its formal independence declaration this week.

Speaking in the Catalan Parliament, Catalan President Carles Puigdemont said on Tuesday night that “I propose suspending the effects of the declaration of independence”, thus lifting the euro.

Instead, Mr. Puigdemont proposed “to undertake talks in the coming weeks without which it is not possible to reach an agreed solution”, thereby strengthening the common currency.

This has boosted the euro, because Mr. Puigdemont comments increase the odds that Catalonia will remain part of Spain, in turn helping Europe’s political and economic stability.

With all this in mind, the euro to US dollar interbank exchange rate has hit this 3-week high today!

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Please bear in mind, this article is Pure FX’s opinion only and does not constitute advice. Moreover, the exchange rates referred to in this article are the interbank rates, which are the rates at which banks and financial institutions buy and sell currency to each other. Therefore these exchange rates cannot be accessed by individuals or SMEs, and are not the same rates that Pure FX can offer. To get a free exchange rate quote, call us on +44 (0) 1494 671800, or email peter.lavelle@purefx.co.uk.

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