The Euro (EUR) edges lower against the US Dollar (USD) on Wednesday, testing fresh six-week lows near 1.1590 at the time of writing.
Oil prices remain above $100 as the US and Iran ramp up threats, boosting the safe-haven USD, while the final Eurozone’s Harmonised Index of Consumer Prices (HICP) has failed to support the Euro
The final Eurozone HICP confirmed preliminary figures showing that price pressures accelerated to 3% year-over-year in April from 2.6% in March, although monthly inflation eased to 1% from the previous 1.3% reading. Core HICP inflation eased to 2.2% from March’s 2.3%, while the monthly reading confirmed an uptick to 0.9% from 0.8%. Earlier in the day, German Producer Prices Index (PPI) confirmed the inflationary pressures stemming from Iran’s war, with the yearly PPI accelerating to 1.7% in April from -0.2% in March.
These figures add pressure on the European Central Bank (ECB) to hike interest rates, a view confirmed by ECB Council member Peter Wunsch, who said on Wednesday that the bank will have to react at some point, as “we are at the beginning of an inflation problem.” In the geopolitical arena, the US-Iran peace process is on tenterhooks with rivals exchanging threats. This is boosting the safe-haven US Dollar, and keeps Oil prices well above the key $100 level, putting the Eurozone’s Oil-importing economies against the wall and hammering the Euro. In the US, the focus will be on the minutes of April’s Federal Reserve meeting, which are expected to show some hawkish tweak.