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EUR to USD Exchange Rate Recovers from Weekend Lows on Poor US Manufacturing Data

June 17, 2019 - Written by Tim Boyer

Investors bought the Euro to US Dollar (EUR/USD) exchange rate back up from the lows it saw over the weekend today, as markets reacted to some disappointing US data. The pair’s potential for gains was limited though, amid Eurozone inflation concerns and anticipation for upcoming Federal Reserve news.

Eurozone economic concerns and some strong US data saw EUR/USD tumble from 1.1340 to around 1.1230 last week, and the pair touched on a fresh fortnight low of 1.1180 when markets opened this morning. At the time of writing through, EUR/USD trended closer to the level of 1.1240.

EUR Exchange Rates Find Support in Mixed Eurozone Wage Data

Last week saw a limp performance in the Euro, amid a lack of strong Eurozone data combined with Eurozone political uncertainties and a brief boost in demand for the Euro’s rival, the US Dollar (USD).

Eurozone data has continued to paint a mixed picture for the bloc’s economic outlook, which has made investors anxious that the European Central Bank (ECB) could be pressures into taking a more dovish stance on Eurozone monetary policy.

In fact, ECB Board Member Benoit Coeure said in an interview that if necessary the bank would cut rates further or introduce more quantitative easing (QE). He said:

‘The question is not whether we have instruments; we do have instruments. We can change our guidance. We can cut rates. We can restart QE,’

However, despite these comments as well as concerns about Eurozone inflation, ECB Vice President Luis de Guindos said over the weekend that long-term inflation expectations had not yet gotten bad enough for the ECB to consider more stimulus.

This morning’s Eurozone data, combined with the day’s fresh US Dollar weakness, helped the Euro to perform a little more resiliently. Eurozone wage growth rose in Q1, which pleased markets.

USD Exchange Rates Slide as Empire’s Manufacturing PMI Prints Surprise Contraction

After slumping at the beginning of the month on fresh bets that the Federal Reserve will cut US interest rates over the next year, the US Dollar found a little relief towards the end of last week’s trade session.

As US retail data and production stats came in stronger than expected in some prints, investors revised Fed interest rate cut bets and the US Dollar rebounded from its lows.

Some analysts argued that Fed interest rate cut bets had been overdone, so bets continued to ease slightly when markets opened today.

Still, as the possible dovishness of the Federal Reserve continues to dominate the US Dollar’s movement, the US currency was a little weaker today in reaction to the latest US manufacturing data.

Empire’s June manufacturing PMI was expected to have slowed from 17.8 to 10, but the figure instead unexpectedly slumped to a contraction of -8.60.

On top of this, NAHB’s US housing market index from June unexpectedly slowed to 64, rather than climbing to 67 as forecast.

These stats weighed on the US Dollar’s strength, but investors are still hesitant to move too much on the US currency ahead of Wednesday’s Federal Reserve news.

EUR/USD Exchange Rate Forecast: Slew of Key Eurozone Data in Focus Tomorrow

While Wednesday’s Federal Reserve policy decision is likely to be this week’s most major event for Euro to US Dollar exchange rate investors, tomorrow’s upcoming slew of Eurozone ecostats could also be very influential.

In what is likely to be the most influential data of the week for the Euro, Eurozone inflation and economic sentiment stats will be published.

In particular, the Eurozone’s final May Consumer Price Index (CPI) inflation rate stats will give markets a better idea of whether Eurozone price pressures are strong enough for the European Central Bank (ECB).

If Eurozone inflation falls short, pressure could build for the ECB to take a more dovish stance on monetary policy. This would lead to Euro losses.

ECB President Mario Draghi will also hold a speech tomorrow, which could influence ECB bets and the Euro.

If there are no major surprises though, Euro to US Dollar exchange rate investors will turn their attention to Wednesday’s session and the Federal Reserve’s highly anticipated policy decision.
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