Euro US Dollar (EUR/USD) Exchange Rate Muted as US-China Trade War Drags on Manufacturing

November 4, 2019 - Written by John Cameron

STORY LINK Euro US Dollar (EUR/USD) Exchange Rate Muted as US-China Trade War Drags on Manufacturing

Euro US Dollar (EUR/USD) Exchange Rate Flat as US-China Tensions Weigh on US Manufacturing

The Euro US Dollar (EUR/USD) exchange rate was left muted and the pairing is currently trading at around $1.1155.

The US Dollar was left under pressure as data revealed new orders for US goods slumped more than expected in September.

This implies manufacturing remains soft as the US-China trade war which has gone on for 16 months has caused a decrease in business investment.

Factory orders slumped by -0.3% compared to September 2018, and month-on-month orders slumped by a worse-than-expected -0.6%.

Euro (EUR) Muted as German Manufacturing Remains Near Decade-Low

The single currency remained under pressure on Monday as data revealed the bloc’s largest economy saw its manufacturing PMI edge up but remain near a decade-low.

October’s PMI edged up slightly from a 123-month low of 41.7 to 42.1 in October, although this was still the second-lowest reading since June 2009.

Added to this, Germany’s new orders slumped for the thirteenth consecutive month and manufacturers reported a steep fall in buying levels.

Commenting on this, Markit’s Principal Economist, Phil Smith noted:

‘The German manufacturing sector remains in recession and continues to pose a threat to the domestic economy through a rising number of factory jobs losses. Employment across the goods-producing sector is now falling at the fastest rate for the best part of ten years, though it should be said that the decline is nothing like that seen during the depths of the global financial crisis, and is so far mainly restricted to contractors.’

US-China Trade Optimism Weighs on US Dollar (USD)

The US Dollar was left under pressure at the start of the week as US-China trade optimism increased after US President Donald Trump suggested a deal could be signed in Iowa.

Trump also noted that negotiations between the two sides on the ‘Phase One’ agreements were going well and he hoped it would be signed at a US location once complete.

Meanwhile, on Monday China’s Foreign Ministry said that President Xi Jinping and Trump have been in contact through ‘various means’ which weighed on the safe-haven USD as investors flocked to riskier assets.

Speaking today, Foreign Ministry spokesman, Geng Shuang stated:

‘As for a meeting between the leaders of China and the United States, what I can say is that President Xi and President Trump have maintained continuous contact through various means.’

Euro US Dollar Outlook: Will a Dovish ECB Chief Weigh on EUR?

Looking ahead to this evening, the Euro (EUR) could be left under pressure against the US Dollar (USD) following the European Central Bank (ECB) chief, Christine Lagarde’s speech.

If the incoming ECB President remains in line with outgoing President Mario Draghi’s easing policy as expected by markets, the single currency could fall.

Meanwhile, Tuesday’s release of the Eurozone’s Producer Price Index (PPI) could cause the Euro to extend its losses against the Dollar.

If inflation contracts further than expected in September, it could cause the Euro US Dollar (EUR/USD) exchange rate to slump.

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