Euro to US Dollar Exchange Rates Slide from Fortnight High on Federal Reserve Hawkishness
Investors were hesitant to keep buying the Euro to US Dollar (EUR/USD) on Thursday, as the Federal Reserve’s latest meeting minutes indicated the bank was still on track to hike US interest rates again as soon as September.
After briefly touching a yearly interbank low of 1.13 last week, EUR/USD recovered and closed the week at the interbank level of 1.14.
Since then, EUR/USD has seen stronger gains and touched a fortnight high of 1.16 on Wednesday. At the time of writing on Thursday, EUR/USD trended at the level of 1.15 as the Euro (EUR) fell from its highs.
After being sold for most of the week so far, the US Dollar (USD) rebounded slightly following the publication of the Federal Reserve’s latest meeting minutes, which slightly soothed market concerns about the direction of US monetary policy.
Euro (EUR) Exchange Rates Fail to Hold Best Levels as Eurozone PMIs Slip
A slightly stronger US Dollar (USD) was able to recover more easily from its weekly lows against the Euro (EUR) on Thursday, as markets were mixed on the results of the latest Eurozone PMI report.
While France’s and Germany’s August PMI projections from Markit beat expectations in most notable prints, German manufacturing slipped and the Eurozone’s overall figures were generally disappointing too.
The Eurozone’s services PMI projection for August met forecasts, rising from 54.2 to 54.4, but the manufacturing PMI unexpectedly slipped to 54.6 rather than from 55.1 to 55.0.
Overall, the Eurozone’s composite print only edged higher from 54.3 to 54.4, rather than the forecast 54.5.
Markit’s report also highlighted some underlying concerns. According to Markit Chief Economist, Chris Williamson:
‘Escalating political worries, rising prices and a recent slowdown in order book growth have all contributed to the gloomiest outlook for almost two years, according to companies’ expectations of their future output. In manufacturing, optimism is down to its lowest for almost three years, as a near-stalling of exports corroborated escalating trade war worries.’
US Dollar (USD) Exchange Rates Benefit from Federal Reserve Minutes
For most of the week, the US Dollar (USD) had been tumbling due to US political uncertainties, as well as concerns about whether US President Donald Trump may attempt to undermine the independence of the Federal Reserve.
However, as the latest Federal Reserve meeting minutes indicated that the bank was planning to hike US interest rates again in September, those concerns took a backseat and the US Dollar strengthened slightly.
Still, the Fed minutes weren’t completely hawkish and this likely limited the US Dollar’s attempted recovery against the Euro (EUR) today.
The Fed indicated it was examining the potential downside effects of global trade tensions on businesses and consumer activity.
On top of this, investors were hesitant to rush into buying the US Dollar again with Friday’s upcoming Jackson Hole symposium imminent.
Euro to US Dollar (EUR/USD) Forecast: Central Bank Developments Anticipated at Jackson Hole
The Euro to US Dollar (EUR/USD) exchange rate is still on track to sustain gains this week, but surprising Friday data or Central Bank developments from the upcoming Jackson Hole symposium could cause some late-week shifts in movement.
The Jackson Hole symposium is a major annual Central Banking conference, and the 2018 event will take place on Friday.
Analysts are anxious to hear about the views of Federal Reserve officials on US monetary policy, as well as the bank’s valued independence.
Since US President Donald Trump has criticised the Fed in recent months, concerns are growing that the Fed’s independence could be undermined somehow.
If the Fed is able to ease market concerns about its independence, the US Dollar (USD) is likely to see stronger demand. Of course, worsening US political jitters would have the opposite effect.
Friday’s German Gross Domestic Product (GDP) growth data or US durable goods orders could also cause some late-week movement in the Euro to US Dollar (EUR/USD) exchange rate.