Euro-dollar dynamics and the inflation debate

By Blu Putnam, Chief Economist & Erik Norland, Senior Economist, CME Group

Gold, Dollar Signaling Inflation Risk?

• Gold, dollar signaling market expectations for higher inflation?
• Rising yields are consistent with concerns over inflation risk.
• Fed’s pause in asset purchases could be behind rising long-term yield.
• Inflation has held at about 2% for 25 years despite efforts to raise it.

Euro Surges Against US Dollar Despite Negative Rates

• Euro rallied to a 27-month high against US dollar in August.
• Euro buoyed by continued pandemic fiscal stimulus in Europe.
• Negative rates in eurozone have not worked against euro.
• Uncertainty over US election outcomes weighing on dollar?