The Euro (EUR) exchange rate advanced against the US Dollar (USD) on Wednesday after data showed that US durable goods orders fell unexpectedly last month. Also putting pressure on the ‘Greenback’ were comments made by Chicago Federal Reserve President Charles Evans.
The Euro was lifted higher early in the session following the release of a forecast beating business sentiment survey published by German research group IFO. According to the group’s index, optimism among German businesses rose for a fifth consecutive month and climbed to its best level since July 2014 in March. The current conditions index rose to 112 from 111.3 in February, and showed that businesses were more optimistic about their prospects for the next six months.
The data adds to signs that the Eurozone’s largest economy is strengthening at an increasing pace and adds to last week’s positive ZEW and this week’s PMI reports.
As the session progressed, the single currency made more gains after Chicago Fed President Charles Evans said that the central bank’s policy makers should be confident that the nation’s inflation rate will rise back to 2% and urged them to delay hiking interest rates until it has done so.
‘Given uncomfortably low inflation and an uncertain global environment, there are significant risks, but few benefits, to increasing interest rates prematurely. A prudent risk-management and goal-orientated approach to US monetary policy dictates that we continue to assess inflation developments for some time before generating more restrictive financial conditions,’ Evans said.
Putting further pressure on the US Dollar was the release of Durable goods data, which showed that orders for such items fell unexpectedly last month. The decline raised worries that a slowdown in global economic growth may be negatively affecting US manufacturers.
According to the Washington based Commerce Department, orders for goods designed to last for more than three years declined by -1.4%. The figure was a drop from the downwardly revised figure of 2% recorded in January.
Further gains for the Euro are expected to be limited due to the European Central Bank’s quantitative easing programme beginning to make its presence felt in the exchange rate market.
While the German data is encouraging, it will not change things much for the Euro. We are only in the third week of ECB money printing and while the Euro has moved higher due to data releases those gains are unlikely to be sustained in the long term.
The Euro to US Dollar exchange rate was trading in the region of 1.0967.