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Euro (EUR) to US Dollar (USD) Advances on IFO?s German Business Figures

September 26, 2016 - Written by James Fuller

Last week, the Euro to US Dollar exchange rate had difficulty trending strongly and largely advanced due to the weakness of the US Dollar. However, if this week’s German and Eurozone data marks an improvement it could lend the Euro more solid support.

EUR/USD advanced by over half a cent last week, from the level of 1.1157 to 1.1225. Its upward trend could continue in the coming week but it has yet to stray far from the week’s opening levels.

Euro (EUR) Given Firmer Footing on IFO Report



The Euro trended relatively limply last week amid a lack of key supportive data. While influential preliminary September PMIs were published by Markit on Friday, these were mixed and as a result did not inspire specific direction in EUR trade.

Manufacturing beat expectations in Germany and the Eurozone bloc as a whole, but German Services printed so poorly that it dragged down Composite scores for the whole bloc.

Despite this, the Euro was able to trend sturdily against most of its rivals last week, as the shared currency benefitted from weakness in the US Dollar amid a Fed-influenced selloff.

On Monday, the shared currency also saw a slight boost in demand on a German business confidence report from IFO. Business climate improved from 106.2 to 109.5 in September, while current assessment advanced from 112.8 to 114.7 and expectations gained from 100.1 to 104.5.

This indicated a recovery from Brexit-jitters, as German business confidence hits its best levels in over two years.

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US Dollar (USD) Recovering Slightly from Fed Selloff



Last week was a disappointing week for US Dollar investors, as the Federal Reserve opted to leave US interest rates frozen.

While markets had expected the Fed to leave rates frozen, this also indicated heavily that there would only be one interest rate hike in 2016 (if any). Investors had previously expected at least two, and downgraded forecasts weighed heavily on USD appeal last week.

As a result, the US Dollar plunged later in the week and lost a lot of its support, allowing the Euro to advance.

The US Dollar remained weak towards the end of the week, when Markit’s preliminary September Manufacturing scores printed a disappointing score of 51.4.

However, the ‘Greenback’ appeared to be recovering from last week’s selloff on Monday morning as investors re-bought the currency at its lows.

EUR/USD Forecast: Key US Consumer Confidence Due Tuesday



This week will see a trickle of early-September economic data. As soon as Tuesday, various influential US September stats will be published, including Markit’s preliminary Services and Composite PMI scores, as well as September’s consumer confidence results.

Consumer confidence is expected to have taken a knock in September as November’s US Presidential election approaches, causing nervousness in citizens.

Tuesday will also see the publication of Germany’s August’s retail sales figures, but more influential Eurozone stats will not be published until Thursday’s German unemployment and Consumer Price Index (CPI) results.

If Eurozone data beats expectations throughout the week, the Euro has a strong chance of making a solid advance against the US Dollar.

Fed Chairwoman Janet Yellen is expected to make a speech on Wednesday, which could also weaken the US Dollar if she exercises caution over the US economic outlook for the next few months.
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