The past week has seen the Euro to US Dollar (EUR/USD) exchange rate decline from a high of 1.1321 to a low of 1.1092 with the common currency making only middling gains in spite of the Eurozone Q2 GDP printing above estimates. The annual pace of output had been predicted to hold at 1.2%, but growth of 1.5% was recorded.
Last week, the Euro had a relatively positive start after the Eurozone CPIs for August both stayed at their present rates instead of declining as predicted; this good news was muddied on Tuesday when the glut of Eurozone data failed to provide a clear picture. The German Unemployment Change for August showed a drop of -7k persons and the overall Eurozone employment rate fell from 11.1% to 10.9%, but the French and Italian Manufacturing PMIs both fell along with the overall Eurozone figure from 52.4 to 52.3. Despite this, the Euro stayed strong against the US Dollar on account of the US ISM Manufacturing score showing a drop from 52.7 to 51.1, far below the predicted decline.
The greatest blow to the Euro last week was delivered by none other than European Central Bank (ECB) President Mario Draghi; after the ECB announced that interest rates would be remaining at 0.05% Draghi gave his usual press conference. Based on his statements, speculators concluded that the ECB would be extending the program of quantitative easing introduced at the start of the year past September 2016 – the common currency dived in value as a result, falling from 1.1232 to 1.1092. Draghi later denied the implications, although the damage was done.
The Euro experienced a mild rally at the end of the week despite a range of European Retail and Construction PMIs all showing declines; the rise was triggered by the US Change in Non-Farm Payrolls and Unemployment Rate for August offering ambiguous results with regard to what the Federal Reserve might be thinking about the US interest rate decision.
So far today, the Euro has held its ground against the ‘Greenback’, rising up to 1.1220.
For the rest of the week, Euro/US Dollar exchange rate movement may occur as a result of the US Mortgage Applications figure for the period ending September 4
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, the US Initial Jobless Claims through September 5
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, the German annual CPI figure for August and the US University of Michigan Confidence Index for September.
No prediction has been made for US Mortgages, a 275k Initial Claims figure is expected, stagnation is predicted for the German CPIs and a drop from 91.9 points to 91.2 has been forecast for the US Confidence score. It is worth mentioning that the Euro may be on the back foot for the rest of the week if global economic conditions calm as a number of other influential US results are due out over the next three days.