USD/EUR Exchange Rate Rises 0.4% as US Unemployment Drops to 3.9%

May 4, 2018 - Written by Ben Hughes

STORY LINK USD/EUR Exchange Rate Rises 0.4% as US Unemployment Drops to 3.9%

On 3rd May, the US Dollar to Euro exchange rate opened trading in the region of 0.8366 and despite daily fluctuations closed down lower around 0.8341.

USD/EUR Exchange Rate Rises Over 4-Month High as US Jobless Rate Drops

The US Dollar to Euro (USD/EUR) exchange rate has risen by 0.4% to its highest level since December 2018 today, following the news that US unemployment has fallen by more than forecast.

The US jobless rate in April dropped from 4.1% to 3.9%, beating predictions for a 4% reading. This has also been historic news, showing the lowest unemployment rate in 17 years.

This result has raised hopes that the Federal Reserve will raise US interest rates in June, given that this suggests growing US economic strength.

The day’s other US jobs market data, measuring changes to non-farm payrolls in April, hasn’t been quite so positive.

This reading of jobs added to the US economy has risen by 168k, falling short of the anticipated 192k printing.

Elsewhere, US Dollar traders have been watching ongoing US-China trade negotiations, in the hope of a compromise being formed.

The two nations have previously clashed and threatened larger and larger tariffs against one another, as part of a ‘trade war’.

The initial meeting hasn’t been especially fruitful, although as it only lasted for two days expectations had been low.

Chinese state news agency Xinhua has highlighted the difficulties of reconciling contrasting US and Chinese trade policy, saying;

‘Both sides realized that there are some relatively big differences on some issues. More work needs to be done to achieve more progress’.

A warning about the future state of US-Chinese trade has come from Bank of Singapore Chief Economist Richard Jerram, who has said;

‘Irrespective of any short-term deal, trade friction will be a permanent feature of the next few years’.

EUR/USD Exchange Rate Declines on Eurozone Retail Sales Slump

A sizable decline in annual Eurozone retail sales has weakened the Euro (EUR) today, leading to losses against the stronger US Dollar (USD).

Compared to March 2017, there has been a -1% reduction in March 2018’s level of Eurozone sales activity.

The month-on-month reading has also declined, from 0.3% in February to 0.1% in March.

Additional EUR/USD exchange rate losses have been triggered by the Eurozone composite PMI for April, which has shown an overall economic slowdown during the month.

Responding to the data, Christ Williamson of IHS Markit said;

‘“The final PMI numbers confirm the marked, broadbased fading of the Eurozone’s growth spurt so far this year.

‘The headline index has fallen from an eleven-and-a-half year peak in January to a 15- month low in April.

‘Despite the drop, the PMI is not yet at a worryingly low level, but the survey details hint at further easing in the coming months’.

USD/EUR Exchange Rate Forecast: Will Inflation Rate Data Push US Dollar Higher?

The US Dollar (USD) could extend its recent gains against the Euro (EUR) in the coming week, when April's US inflation rate stats come out on 10th May.

The readings are tipped to show growth for the monthly, base annual and core annual figures, which might trigger a US Dollar rally.

Higher inflation increases the chances of the Federal Reserve being pressured into raising interest rates, as a response to try and reduce excessive price growth.

On the less positive side, there will also be University of Michigan consumer confidence data released on 11th May.

This is forecast to show a minor decline in US consumer sentiment levels in May, which could push the USD/EUR exchange rate down before the weekend.

Next week’s Euro-influencing data releases will be German construction and Eurozone retail activity stats on 7th May, followed by a German trade balance reading on 8th May.

Although the Eurozone retail PMI is expected to show contraction, German construction sector growth is forecast along with a trade surplus expansion.

The German economy is sometimes seen as an indicator of overall Eurozone health, so two positive results could outweigh any negative impact from a retail sector decline.

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TAGS: Euro Forecasts