Already firming on healthy core inflation data, the euro further pushed to Tuesday’s highs against the greenback after President Donald Trump’s top trade adviser indicted Germany of currency exploitation.

As of writing, EUR/USD is trading higher 0.50% to 1.0748, hitting an intraday peak of 1.07639. Since late last month, the pair is seen to be steadily climbing to levels last seen in the first week of December. While the shorter time frames may seem bullish for EUR/USD, the pair is still strongly bearish in the long-term.

The US dollar index, a gage in which the greenback’s strength against a basket of six major currencies is measured, slid 0.47% to 99.96, mere points away from an intraday low of 99.89 in the wake of the said remarks.


European growth, data

Earlier today, official data showed that economic growth and inflation in the euro area gained in December.

The annual rate of euro area inflation climbed to 1.8%, up from 1.1% in the last month, the highest level since February 2013. The European Central Bank targets inflation of close to, but just falling below 2%. The flash estimate of the headline CPI was up 1.8%, higher than the forecasted 1.6% and up from the 1.1% result in the preceding quarter.

Underlying inflation, meanwhile, sustained a steady pace at 0.9% year-on-year—unchanged from December. A lagging underlying inflation would mean that the ECB is not likely to begin tapering its stimulus program until 2018.

Richard Cochinos, head of European G10 FX Strategy at Citigroup, said that “You have a French CPI upside surprise and a massive Spanish surprise. So you do have a more positive European inflation story. Bund yields are up and that is pulling the euro higher.”

With core inflation in line with forecasts as well, the euro firmed earlier in the session.

In a separate report, euro zone gross domestic product (GDP) jumped by 0.5% in the three months leading to December, higher by 0.4% in the third quarter and up from a 0.4% estimated growth.

The euro area unemployment rate declined to 9.6% in December from the previous 9.8% in November.

Currency exploitation?

The European currency further rose following comments from Peter Navarro, the head of US President Trump’s new National Trade Council that accused Germany of using a “grossly undervalued” euro to exploit the US and its trading partners.

These comments suggested that the administration is placing its focus on currencies as part of its tactic on trade relations.


The US dollar was also on course for its worst beginning to a year since 2008 today as worries over the larger shape of policy under President Trump offset the expectations of higher US inflation which conquered the conclusion of 2016.

Enthusiasm for the new administration has weakened due to the lack of clarity on fiscal policy in Trump’s first 10 days in charge, with currency markets also anxious by hints that both the president and his pick for Treasury Secretary would prefer a weaker dollar.

Elsewhere, the Federal Reserve will commence a two-day meeting on Tuesday and any development in the board’s outlook of the economy in its concluding statement the next day would likely fuel hopes on another interest rate hike.

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