Euro Founders As Dollar Rises
The euro recovered modestly on Thursday after falling to a nine-month low on Wednesday following U.S. GDP reports.
The common currency traded at $1.3386 at 7:15 GMT as the U.S. dollar surged because of improving economic indicators.
Data out on Wednesday showed that the U.S. economy grew at an unexpectedly fast pace in the second quarter, proving that the nation’s first quarter contraction was a weather-related fluke.
U.S. GDP increased by 4 percent from April to June, which helped the dollar climb to new highs.
However, the Federal Reserve’s policy statement was not as dovish as investors were expecting, and capped the greenback’s gains.
Although the Fed revised its economic outlook to reflect the nation’s promising economic indicators, the bank showed no sign of willingness to raise interest rates early. Instead the bank indicated that it was confident with the direction of inflation, but still worried about stability in the labor market.
Meanwhile, the euro plummeted with the dollar on the rise, and new data suggesting that the region’s already low inflation may have fallen further. The Financial Times reported that Germany’s July consumer price inflation came in at its lowest level in four years, at 0.8 percent.
The figure is a worrying sign for the rest of the bloc, as Germany, the region’s largest economy, has been the engine keeping the eurozone afloat since the financial crisis began. Spain also released disappointing consumer price data, which showed a 0.3 percent decline.
With these figures in mind, some analysts have revised their inflation forecast for the entire bloc from remaining at 0.5 percent to declining even further.
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