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Euro US Dollar (EUR/USD) Exchange Rate Slips as Trade War Fears Take Temporary Reprieve

April 5, 2018 - Written by John Cameron

Eurozone Retail Sales Fall – Euro (EUR) Exchange Rates Pare Recent Gains



The Euro US Dollar (EUR/USD) exchange rate fell on Thursday, paring recent gains as markets reacted to a range of below-forecast domestic data releases and cooling anxieties on the US-China trade negotiation front.

According to Eurostat, retail sales the bloc climbed to 1.8% in February, up from the previous period’s 1.5% but missing the forecast of 2.3%.

On a monthly basis, retail sales edged up by 0.1%, reversing January’s -0.3% fall.

Furthermore, the bloc’s composite purchasing managers’ index (PMI) reading also came in below forecasts at 55.2, down from the expected 55.3.

This was, however, still a robust reading, well above the 50-point mark that separates contraction from expansion.

In other news, new factory orders in Germany saw a massive drop in growth year-on-year from 6.3% to 3.5%.

This was counteracted by the performance of the monthly reading, however, which recovered from -3.9% to 0.3%.

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Nonetheless, despite Germany’s questionable economic performance in the first three months of 2018, the market outlook for the bloc’s largest economy is still positive. With economists such as Carsten Brzeski from ING-DiBa asserting that the near term outlook ‘still looks rosy’.

Hope Grows for US-China Trade Negotiations – US Dollar (USD) Exchange Rates Rally



The predominant mover in the EUR/USD exchange rate today was not data, but news that the US and China might not be on the cusp of starting a global trade war like previously thought.

Top US Economic Advisor, Larry Kudlow has eased market anxieties by asserting that the US and China’s tariff talk is merely part of the negotiation process, and that tariffs might not actually be needed if China agrees to lower its barriers to trade.
‘Yes, it’s possible,’ Kudlow told reporters.

‘It’s part of the process. I mean, I would take the president seriously on this tariff issue. You know, there are carrots and sticks in life, but he is ultimately a free trader. He’s said that to me, he’s said it publicly. So he wants to solve this with the least amount of pain’.

The possibility of less trade intervention is great news for the markets, and combined with the understanding that China’s proposed tariffs would only effect some 0.3% of US GDP (if they do go ahead), anxieties have cooled.

As a result, demand returned once more to the US Dollar, siphoned away from other majors like the Euro.

Euro US Dollar (EUR/USD) Exchange Rate Forecast: US Employment Readings in the Spotlight



The Euro US Dollar (EUR/USD) exchange rate could see volatility tomorrow depending on the performance of the highly anticipated US employment readings.

Markets currently predict the US unemployment rate to fall from 4.1% to 4.0%, with average hourly earnings also expected to climb from 2.6% to 2.7%.

If this occurs then it could push the US Federal Reserve closer to having 4 rate hikes this year, rather than 3 – an event that could extend the ‘Greenback’s’ lead into the week’s end.
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