Euro US Dollar (EUR/USD) Exchange Rate Recovers Ground on Improved Eurozone Trade Surplus
An unexpectedly sharp widening of the Eurozone trade surplus encouraged the Euro to US Dollar (EUR/USD) exchange rate to return to an uptrend.
While forecasts had pointed towards an improvement in June’s trade balance investors were still surprised to find that the surplus had widened from 16.9 billion to 22.5 billion.
This stronger showing suggests that the Eurozone economy has managed to shrug off the general deterioration in global trade relations and fears of increased US protectionism.
Easing market worries over the financial crisis in Turkey also offered support to Euro (EUR) exchange rates on Thursday morning, in spite of lingering uncertainty over the future of the Turkish economy.
Disappointing US Production Data Offered EUR/USD Exchange Rate Boost
The disappointing nature of Wednesday’s US industrial and manufacturing production data offered additional support to the Euro to US Dollar (EUR/USD) exchange rate.
As the US manufacturing sector lost further momentum in June this raised concerns over the negative impact that the Trump administration’s tariffs are having on the domestic economy.
Until investors see a de-escalation in trade tensions between the US and China, as well as other key allies, the upside potential of the US Dollar (USD) looks limited.
With the general sense of market risk aversion easing overnight USD exchange rates faltered, struggling to maintain their recent bullish trend.
Although July’s advance retail sales data bettered forecast this was not enough to shore up the US Dollar at this stage.
Improved US Housing Data to Dent Euro US Dollar (EUR/USD) Exchange Rate
Fresh weakness could be in store for the Euro to US Dollar (EUR/USD) exchange rate this afternoon if US housing data proves positive.
Markets anticipate a solid rebound in both July’s building permits and housing starts figures, something which would signal a healthier domestic housing market.
This could encourage the US Dollar to return to a stronger footing, even though the rebounds are not expected to match the depth of June’s sharp contractions.
August’s Philadelphia Fed business outlook index may weigh on demand for the US Dollar, however, if sentiment shows fresh signs of softening.
Focus will also fall on the latest US jobless claims data, with markets still looking for further signs of tightening within the domestic labour market.
Eurozone Inflation Data to Provoke EUR/USD Exchange Rate Jitters
The Euro to US Dollar (EUR/USD) exchange rate may find support on the back of Friday’s finalised Eurozone consumer price index data, however.
July’s headline inflation rate is forecast to show a slight uptick from 2.0% to 2.1% on the year, raising hopes that price pressures could continue to build.
However, if the monthly measure is confirmed to have contracted -0.3% this could weigh heavily on the appeal of the Euro.
As the European Central Bank (ECB) looks set to maintain a generally cautious policy approach in the months ahead any signs of weakening inflationary pressure would give investors incentive to sell out of the single currency.
Any deterioration in the Turkish financial situation could also put pressure on the Euro to US Dollar (EUR/USD) exchange rate heading into the weekend.