Disappointing Inflation Slowdown Triggers EUR/USD Exchange Rate Slide
The decline comes after Eurozone PPI inflation slowed by more than expected in December, both on the month and the year.
Falling PPI figures indicate that there is less pressure on the European Central Bank (ECB) to consider tightening monetary policy, leaving the Euro to fall in value on the news.
Eurozone Manufacturing Activity near Historic High
While the EUR/USD exchange rate has fallen, there is still some optimism regarding manufacturing data for January.
The Eurozone-wide manufacturing PMI showed slowing activity during the month, but IHS Markit Chief Business Economist Chris Williamson remained positive:
‘The Eurozone’s manufacturing boom continued in full swing in January.
Output grew at one of the fastest rates recorded over the survey’s 20-year history, matched by a further near-record surge in new orders.’
US Dollar Turns Bullish as Payrolls Figure Beats Forecasts
US non-farm payrolls data triggered a US Dollar to Euro rally today, with USD also rising sharply against the Pound and New Zealand Dollar.
The typically volatile payrolls reading remained true to form, showing 200k jobs added in January, 20k above the 180k prediction.
US unemployment remained at 4.1% during the month, but traders were hopeful about increased odds of a Federal Reserve interest rate hike from the strong payrolls reading.
Euro to US Dollar Exchange Rate Forecast: Volatility ahead on Eurozone PMI Data?
Starting 5 February, the EUR/USD exchange rate could be influenced by PMI activity readings and sales data on Monday, as well as German trade balance data on Thursday.
The Euro to US Dollar exchange rate may fluctuate on 5 February’s Eurozone data, as while growth in services and composite PMI is forecast, retail sales slowdowns are also predicted.
The sales data will cover December, so it may end up being the stronger influence on the Euro.
Normal expectations would be for an increased retail sales print in December, which encompasses the traditional shopping season.
The week’s other high-impact Eurozone news may also disappoint, as the German trade deficit is projected to shrink when figures are released on 8 February.
Despite this, the Euro may remain stable if Germany’s trade surplus remains close to 21.8bn; a figure that is still indicative of economic strength.
Major US economic data will be out on 5 – 6 February, covering PMI readings and trade balance stats respectively. In the US, Markit and ISM measure economic activity and compose PMI scores. Markit is expected to report a slowdown for US composite and services PMIs, while predictions are for ISM to report higher non-manufacturing PMI activity.
The non-manufacturing reading is the most significant of the three announcements, so the US Dollar could appreciate on the news.
The US trade deficit is tipped to expand on Tuesday, but this may not have much impact on the US Dollar to Euro exchange rate as the deficit is longstanding.