EUR/USD: US CPI to lift yields and boost the greenback

EUR/USD has been struggling as higher US yields boost the dollar. US inflation, coronavirus headlines and the ongoing US fiscal impasse are in play. Overall, most factors play in favor of the dollar and against the euro, according to FXStreet’s analyst Yohay Elam.

Key quotes

“Investors seemed to have an insatiable appetite for scooping up US debt, but that may have reached its limits. Uncle Sam is issuing a record amount of bonds this week, and this time, yields have been on the rise. In turn, that is supporting the dollar across the board.” 

“US inflation figures for July due out later in the day, are set to show steady gains, potentially lifting yields and impacting the dollar.” 

“The White House waived its requirement from states to add $100/week in special unemployment benefits, leaving only Washington's $300/week – half the previous payment. In the meantime, it is unclear if executive orders on that topic and others have legal standing and how long it will take to roll them out. The economy may suffer a consumption cliff as millions of unemployed have less cash in their pockets.” 

“Coronavirus cases are also worrying – with the US recording the highest daily deaths since May. That may be a one-off, with the broader trend showing a decline in infections and mortalities. In Europe, COVID-19 infections continue rising, with concerns growing in Germany and around new regions in Spain. So far, the US situation is worse, but Europe's coronavirus advantage is not set in stone.”

“Russia announced that it registered the world's first coronavirus vaccine – a declaration that received a lukewarm response. President Putin said his daughter was inoculated, but could not explain why his country skipped the all-important Phase 3 trial. The global race continues, with Massachusets-based Moderna receiving a pre-order of 100 million doses from the Trump administration. Hopes for developing rapid immunization may turn the tables against the dollar.”