Euro US Dollar (EUR/USD) Exchange Rate Flat as Eurozone Flash PMI Composite Hits Seven-Month High

June 21, 2019 - Written by John Cameron

STORY LINK Euro US Dollar (EUR/USD) Exchange Rate Flat as Eurozone Flash PMI Composite Hits Seven-Month High

Euro US Dollar (EUR/USD) Exchange Rate Muted as Eurozone Optimism Slumps to Four-and-a-Half Year Low

The Euro US Dollar (EUR/USD) exchange rate remained muted and the pairing is currently trading at an inter-bank rate of $1.1299.

On Friday data showed that the Eurozone’s flash PMI composite hit a seven-month high of 52.1 in June.

Growth was largely driven by the service sector, which offset the ongoing downturn in the bloc’s manufacturing sector.

However, optimism in the bloc fell to the lowest level since late-2014 which suggests growth will continue to remain weak in the coming months.

This likely dampened sentiment in the single currency, leaving the pairing muted.

Commenting on the data, Chief Business Economist at IHS Markit, Chris Williamson said:

‘Growth also remains very much dependent on the service sector, which in turn largely reflects the relative strength of domestic consumer demand and improving labour markets. Manufacturing, in contrast, remains in a steep downturn which is only showing tentative signs of moderating.

‘The overall rate of growth consequently remains subdued, and a further deterioration in business confidence about the year ahead suggests the pace of expansion will continue to be restrained by uncertainty and risk aversion. Concerns about weaker economic growth at home and in export markets, rising geopolitical risks and trade wars continue to dominate the picture and dampen business spending, investment and sentiment.’

US Dollar (USD) Under Pressure Ahead of Trump-Xi Meeting

The US Dollar remained under pressure ahead of next week’s meeting between the leaders of the US and China at the G20 summit.

Just days before US President Donald Trump and Chinese Premier Xi Jinping are due to meet, Guo Shuqing, Chairman of the China Banking Regulatory Commission said the US would ‘pay a huge price’ for the trade conflict.

This likely increased already heightened tensions between the two sides, and weighed on the 'Greenback' that has already been dampened by a dovish Federal Reserve

Writing a commentary in the People’s Daily, the state owned newspaper, Guo Shuqing stated:

‘The US can no doubt increase tariffs on us to the extreme, but this will have very limited impact on the Chinese economy. By contrast, the US itself will be hit to almost the same degree.

‘The goal for the US in raising tariffs is to decrease the trade imbalance between China and the US, but because of Chinese countermeasures, the direct result has become uncertain and the [US action] could even backfire.’

Euro US Dollar Outlook: Will a Disappointing Flash US PMI Composite Weigh on USD?

Looking ahead this afternoon, the US Dollar (USD) could slide against the Euro (EUR) following the release of the US PMI composite.

If the flash Markit PMI composite reveals growth has slowed in June, it could weigh on the ‘Greenback’.

Meanwhile, the pairing could fall at the start of next week’s session following the release of the German IFO current assessment.

If data shows increased pessimism for business expectations and current conditions in Germany, the Euro US Dollar (EUR/USD) exchange rate could fall.

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TAGS: American Dollar Forecasts Euro Forecasts