Euro to US Dollar Exchange Rate (EUR/USD) Sheds Most of Wednesday’s Gains amid Reignited Eurozone Trade Fears

Euro to US Dollar (EUR/USD) Exchange Rate Fails to Capitalise on US Election Results

Despite the 2018 US midterm election results being generally US Dollar (USD) negative, the Euro to US Dollar (EUR/USD) exchange rate shed most of its election-related gains as Wednesday’s session drew to a close.

While EUR/USD is still trending half a cent above the week’s opening levels, it found little additional support on Thursday as the latest German trade data fell short of expectations.

As investors continued to digest US political developments and Eurozone growth concerns weighed on sentiment, EUR/USD slipped back from its best levels in a fortnight.

So far today, EUR/USD movement has been modest, but the Euro’s chances of mounting another advance against the US Dollar were dampened by Germany’s latest trade stats.

Meanwhile, investors remained hesitant to support the US Dollar amid a lack of supportive news, as well as market anticipation for the Federal Reserve’s upcoming November policy decision.

Euro (EUR) Exchange Rates Tumble as Eurozone Data Continues to Point Lower

Hopes that the Eurozone economy could remain resilient and continue the strong trends of growth seen over the last year have largely faded, as even this week’s most impressive Eurozone ecostats indicate that the bloc’s growth is slowing.

Such was the case with Wednesday’s German industrial production and Eurozone retail sales stats. Even though they beat forecasts in some prints, the data still showed a notable slowdown from earlier in the year.

As a result, they did little to put investor concerns about the health of the Eurozone economy at ease.

Today’s session began with the publication of Germany’s September trade balance stats, which showed that German imports and exports had both unexpectedly contracted month-on-month.

Analysts noted that Germany’s trade trends were being negatively hit by global trade jitters. According to Cartsen Brzeski from ING:

‘Today’s trade data ends a disappointing week for German industry. Available monthly data suggests that the economy had its worst quarterly performance in 3Q since the beginning of 2015.’

US Dollar (USD) Exchange Rates Steady Ahead of Federal Reserve Decision

Investors piled out of the US Dollar (USD) on Wednesday, as the results of 2018’s US midterm elections came in and revealed that the Democratic Party had won majority control over the House of Representatives.

The news indicated that Congress could become stuck in a gridlock, and that US President Donald Trump would likely struggle to push through further fiscal policy legislation.

Ultimately, however, the elections unfolded the way pollsters and analysts expected, so its impact on the US Dollar this week was limited.

Investors are hesitant to buy the US Dollar today as they anticipate the Federal Reserve’s November policy decision this evening.

Euro to US Dollar (EUR/USD) Exchange Rate Investors Anticipate Federal Reserve

As most of this week’s most notable Eurozone data has been published already, the Euro to US Dollar (EUR/USD) is likely to be driven by US news and potential political developments for the remainder of the week.

This evening, the Federal Reserve will hold its November policy decision. The bank is not expected to make any changes to monetary policy, but analysts speculate the bank could alter its guidance.

Stronger-than-expected data in recent sessions has led to speculation that the Federal Reserve could ramp up the pace of its interest rate hikes. According to Sim Moh Siong, Currency Strategist from Bank of Singapore:

‘The Dollar is likely to benefit as we still expect the Fed to maintain its hawkish stance. The US economy needs rising rates as wage pressures are building and there is a risk of an overheating of the economy,’

If the Fed becomes more hawkish the Euro to US Dollar exchange rate could shed more of this week’s gains.

On the other hand, if the bank is unexpectedly cautious or indicates the pace of US interest rate hikes will likely not increase, the US Dollar may remain limp and EUR/USD could more easily climb again.

Friday will round the week off with France’s September industrial production results and Michigan University’s consumer confidence stats, which could both cause some late-week Euro to US Dollar (EUR/USD) exchange rate movement.

Josh Ferry Woodard

After leaving university in 2011 Josh briefly worked as a currency analyst in the South West of Cornwall. Josh continued monitoring the currency markets and publishing exchange rate analysis after moving to London in 2012, with a particular focus on the impact of economic and political stimuli on forex. Josh was a regular contributor to The Telegraph’s weekly currency feature for several years.

Contact Josh Ferry Woodard