With the US political stage dominating focus, both the Euro and US Dollar have been under performing today. The past week saw the Euro to US Dollar (EUR/USD) exchange rate remain at a roughly level pegging, with movement generally staying in the region of 1.1020.
Euro Softened by Abysmal Domestic Data
The appeal of the Euro was seriously damaged last week by Eurozone data, most of which failed to inspire any degree of confidence in the single currency.
Monday saw the preliminary manufacturing, services and composite PMIs for February all get revised down from previous readings, while Tuesday’s GDP and IFO confidence results similarly devalued the common currency.
Closing off the week, finalised inflation printed negatively on the month in January while February’s CPIs similarly slid.
Deflation Prediction Sours Eurozone Investor Mood Today
Movement for the Euro today has been singularly negative, as yesterday’s estimate for February’s annual base inflation was for a figure of -0.2%.
In spite of both Germany and the Eurozone showing positive outcomes for their February unemployment rates, the Euro has failed to capitalise on such supportive developments given the panic inspired by a negative CPI result and its likely impact on the ECB’s attitude to fiscal stimulus.
US Dollar Movement Determined by Political Events and Mixed Domestic Data
The US Dollar failed to advance against the Euro overall last week, given that it was repeatedly held back by domestic data. The most notable of these releases were the almost-contracting manufacturing score, the sizable drop in consumer confidence and a contraction result for services in February.
An overarching factor that caused concern was the coming of ‘Super Tuesday’, which has finally arrived. The day is so-called because it features a majority of the voting for the Republican and Democrat candidacy for the presidential seat; at the time of writing, likely Republican contenders were Donald Trump, Marco Rubio and Ted Cruz, while for the Democrats, Hilary Clinton is expected to seize a sizable majority against her rival Bernie Sanders.
This Week’s EUR/USD Exchange Rate Forecast
Undeniably, Euro/US Dollar exchange rate movement is likely to be dramatic in the near future, as well as across the week as a whole. In the short-term, the outcome of ‘Super Tuesday’ will be a critical factor in any US Dollar exchange rate movement, as a sizable win for Trump could send confidence in the US economy plummeting.
By contrast, a more even spread of Republican results, such as a neck-and-neck outcome between Trump and Rubio or a three-way split between the top 3 contenders would likely lessen the damage done to the USD’s prospects.
Further movement this week may occur as a result of tomorrow’s US crude oil inventories result and Thursday’s Eurozone composite and services PMIs, as well as the currency bloc’s overall January retail sales result, which is out on the same day.
The US is set to dominate the close of the week as Thursday will bring the ISM non-manufacturing/services composite for February and Friday will include the high-impact unemployment rate and change in non-farm payrolls stats for February.