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Euro to US Dollar (EUR/USD) Exchange Rate Rises as US Protests Weigh on Greenback

June 1, 2020 - Written by John Cameron

EUR/USD Exchange Rate Increases as US Manufacturing PMI for May Falls Below Forecasts

The Euro to US Dollar (EUR/USD) exchange rate edged higher today, with the pairing currently trading around $1.11.

The US Dollar (USD) has been held back by the shocking wave of protests throughout the United States over the weekend.

As a result of the riots, investors are becoming increasingly concerned that the US’ $4 trillion deficit could increase further, another $3 trillion spending bill having already passed through the House.

Meanwhile, in US economic news, today saw the release of the ISM Manufacturing PMI for May, which fell below forecasts from 41.5 to 43.1.

Chris Williamson, the chief business economist at IHS Markit, commented:

‘Manufacturing remained in a deep downturn in May, as measures taken to contain the spread of COVID-19 continued to cause production losses, disrupt supply chains and hit demand.’

‘For now, however, we focus on the good news that we may be past the worst in terms of the economic decline.’

The US Dollar (USD) is also being held back by risk-on markets, despite rising fears over US-China trade relations deteriorating. However, we could see the ‘Greenback’ begin to edge higher if risk sentiment is dampened by signs of escalating disagreements between the two superpowers.

Euro (EUR) Edges Higher as Optimism for Eurozone Economic Recovery Grows

The Euro (EUR) edged higher today as markets are more optimistic that the Eurozone can begin to make a recovery in the near-term.

This follows today’s publication of the Eurozone’s Markit Manufacturing PMI for May, which improved on April’s record low at 39.4.

Chris Williamson, the Chief Business Economist at IHS Markit, commented:

‘The manufacturing downturn looks to have bottomed-out in April, with production falling at a markedly slower rate in May. The improvement in part merely reflects the comparison against a shockingly steep fall in April, but more encouragingly was also linked to companies restarting work as virus lockdowns were eased. The further lifting of COVID-19 restrictions in coming months should provide a further boost to manufacturers.’

Meanwhile, Euro (EUR) investors are becoming increasingly concerned about Germany’s economy – which is the largest within the Eurozone – after today’s manufacturing PMI fell below forecasts from 36.8 to 36.6.

EUR/USD Outlook: US-China Trade Tensions in Focus

The US Dollar (USD) could edge higher this week if US-China trade tensions escalate. As a result, we could see the ‘Greenback’ begin to rise as risk sentiment is compromised as the two world’s largest economies collide.

Euro (EUR) investors will be looking ahead to Wednesday’s Eurozone unemployment data. However, if the figures continue to rise, then we could likely see the single currency dwindle against its peers.

The EUR/USD exchange rate will remain volatile this week as attention turns to US-China trade relations. Again, the US Dollar (USD) could edge higher against the Euro (EUR) if markets go into risk-off mode.
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