Euro US Dollar Exchange Rate Spikes to 1.12 after Major US PMI Decline

Published: Wednesday, 7 September 2016 15:00 BST - Written by Ben Hughes

STORY LINK Euro US Dollar Exchange Rate Spikes to 1.12 after Major US PMI Decline

Euro (EUR) Softened by Falling Q2 GDP and August Services PMI

The Euro (EUR) managed to climb to a high of 1.12 against the US Dollar (USD) this week, a result not seen since the end of August. Ironically, the trigger for this sizable advance came from the US, when a key US PMI figure fell by a greater amount than had been forecast.

For the US, the week has been an unfavourable one, with a lack of data on Labor Day compounding a major decline in the already-low odds of a Fed rate hike taking place in 2016.

Euro (EUR) Exchange Rate Losses come as Eurozone GDP Flops in Q2

The single currency has been in low overall demand over the course of the week, with the only real source of support being the US Dollar’s deterioration.

News from the Eurozone was not been particularly supportive, with Monday’s opening Eurozone-wide composite and services PMIs for August being revised down for their finalised figures.

While the retail sales results rose in July in the Eurozone, Tuesday’s falling Q2 third estimate for the GDP growth rate put a definite dampener on any real investment in the Euro by the middle of the week.

A small piece of consolation on Tuesday was the news that the August retail PMI rose from 48.9 to 51, resulting in a return to growth for the sector across the currency bloc.

US Dollar (USD) Exchange Rate Shattered by Renewed Drop for Odds of September Fed Rate Hike

The US Dollar has struggled against strong headwinds over the week, with trading opening on a low note due to Labor Day on Monday cutting off any domestic data releases.

The chances of a September Fed interest rate hike have also been in focus for investors, though the week’s data made it increasingly unlikely that such an outcome would take place.

The key event in this lowering of expectations was the ISM non-manufacturing PMI for August, which recorded a major drop off from 55.5 to 51.4.

EUR/USD Forecast: ECB Interest Rate Decision and US Claims Stats Out Tomorrow

The next upcoming event in the Eurozone will be Thursday’s European Central Bank (ECB) interest rate and policy decisions for September, which are expected to result in another rate freeze at 0%.

From the US, input will be had on Thursday by the initial and continuing jobless claims for August and September, which are forecast to rise in both fields.

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