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EUR to USD Exchange Rate Hits Weekly Worst as Eurozone Growth Concerns Deepen

September 23, 2019 - Written by Toni Johnson

Following last week’s modest fall, the Euro to US Dollar (EUR/USD) exchange rate could be in for further losses this week as yet more Eurozone ecostats disappoint investors. The Euro and US Dollar have a negative correlation, so the latest Euro weakness has bolstered US Dollar strength and the latest US-China trade hopes have only supported the US Dollar further.

After opening last week at around the key level of 1.1100, EUR/USD spent most of the week trending lower and the pair eventually closed the week near the level of 1.1019.

EUR/USD losses have only continued this week due to the Euro’s fresh weakness so far. While EUR/USD has rebounded slightly from this morning’s weekly low of 1.0940, the pair still trends low near the level of 1.0985 at the time of writing on Monday afternoon.

EUR Exchange Rates Tumble as PMI Data Worsens Eurozone Recession Fears

Markets had already been concerned that Germany, the Eurozone’s biggest economy, was already in recession.

Unfortunately, today’s data doused much of the market’s hopes that there was a recovery in sight for Germany or the Eurozone as a whole.

Markit’s September PMI projections, published this morning, fell well short of expectations in many key prints, worsening concerns about the Eurozone economy’s health and outlook.

The key German manufacturing PMI projection was particularly worrying, its contraction deepening to a dire 41.4 rather than improving to 44.0 as expected. German services also disappointed, and the nation’s overall composite print unexpectedly contracted at 49.1.

The Eurozone’s overall PMI projections also fell short in every notable print, with manufacturing coming in at 45.6, services at 52.0 and the composite PMI at a near-stagnant 50.4.

According to Chris Williamson, Markit’s Chief Business Economist:

‘The details of the survey suggest the risks are tilted towards the economy contracting in coming months. Most vividly, new orders for goods and services are already falling at the fastest rate since mid-2013, suggesting firms will increasingly look to reduce output unless demand revives.

The overall picture of an economy on the cusp of sliding into decline is underscored by a further deterioration in firms’ pricing power, with average prices charged for goods and services barely rising in September.

With survey data like these, pressure will grow on the ECB to add to its recent stimulus package.’

Overall, with recession fears rising and speculation of more European Central Bank (ECB) monetary policy easing, it was much easier for the US Dollar to push EUR/USD lower.

USD Exchange Rates Benefit from Rival Weakness as US Data Comes in Mixed

The US Dollar was able to climb thanks largely to weakness in its rival the Euro yesterday, but the US currency found little support in the latest US data or news.

This afternoon saw the publication of Markit’s US PMI projections as well. While not as influential as ISM’s US PMIs, the data gave investors a better idea of how the US economy was performing in September.

US manufacturing actually beat forecasts, unexpectedly rising to 51.0, but services fell short and printed nearer stagnation at 50.9. The overall composite PMI avoided the forecast contraction though, climbing to 50.7 instead.

Speaking about the US PMIs, Chris Williamson said:

‘Key to the recent deterioration has been a further spill-over of the trade-led slowdown in manufacturing to the service sector. Inflows of new service sector business almost stalled in September to register the smallest rise since the survey began in 2009. A ray of light comes from manufacturing reporting some easing of headwinds, though factory conditions likewise remained among the toughest since 2009 to underscore the broad-based nature of the current lassitude.’

As well as weakness in its rivals, the US Dollar also benefitted from market optimism regarding US-China trade tensions. A fresh round of negotiations between the nations were reportedly productive, boosting demand for the US Dollar.

EUR/USD Exchange Rate Forecast: Eurozone Confidence Data Ahead

Euro weakness could continue to influence the direction of Euro to US Dollar exchange rate movement in the coming days, as notable Eurozone confidence stats are due to be published.

French and German business confidence stats from September will be published tomorrow, and may give investors a better idea of whether or not these Eurozone economies have a chance of seeing a rebound in economic activity any time soon.

The stats will be followed by French consumer confidence on Wednesday, German consumer confidence on Thursday, and the Eurozone’s overall September business and consumer confidence figures on Friday.

The US Dollar, on the other hand, could see shifts in demand depending on US-China tensions and shifts in risk-sentiment in the coming days.

If not though, Euro to US Dollar exchange rate investors may wait for Thursday’s key US growth rate results before making big moves on the US currency.
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