Euro Strength Continues Despite Mixed Data

• Recovery Almost Complete for Euro Against Dollar
• Inflation Concerns Ahead of ECB Meeting
• Equities Flat Starting Trading Week

The Euro forex market has started the week well moving higher during early trading and the European session to sit on the edge of 1.19 and what will have been a strong return to form for the currency. Rising treasury yields in the US have managed to cap the upside for now, with not even mixed data from the Eurozone hindering progress. At the same time, there is caution on the horizon with the ECB governors meeting on Thursday under a cloud of increased inflation pressure. Markets on Wall Street have made a slow start to the short trading week having been closed yesterday for Labor Day in the US.

Impressive Turnaround for Euro

As recently as a couple of weeks ago, the Euro sat floundering at multi-month lows as Fed tapering concern along with COVID and inflation worry pushed the safe-haven USD higher. Now though, the Euro is fighting its corner strongly and has not really looked back since tapering became a non-issue at least for the moment in the United States.

This would still appear to be the case, with COVID-19 and the Delta variant still very much a concerning factor in the states and other countries. Combine that with the disappointing job numbers of late and the conditions just don’t seem to be there for any tapering to take place. 

Eurozone Inflation Concern in Week Ahead

There are still a couple of key factors at play that have held back those forex trading the EUR/USD though. These include from Germany, the largest economy in the union. The ZEW Economic Sentiment Index fell more than anticipated this month. There is also widespread concern around the inflation numbers being forecast in the bloc ahead of a critical meeting Thursday. 

This will see ECB leaders gather to decide on the policy going forward. There have been quite a few hawkish views raised with the inflation rate for the region reaching a decade high at 3%. Many, including the German Central Bank President, have said that the ECB needs to be ready to curtail its own emergency bond-buying program in the face of inflation. Eyes will be fixed on any major shift to come from the meeting. 

Slow Start to Week on Wall Street

Forex brokers may be seeing moves, but it has been a slower start to the week on Wall Street. Futures remain generally flat on Tuesday morning following closure yesterday for Labor Day. The main area of concern would seem to be COVID-19 cases with the uptick in Treasury yields not lending any easy favors.

With no key data to be released until the weekly employment figures on Thursday, markets remain open to the influence of news and particularly virus case numbers. Producer prices are also due at the end of the week. These will work to provide some insight as to how inflation is doing in the US.