Negative German Economic Sentiment Limits Euro US Dollar (EUR/USD) Exchange Rate Momentum
February’s German economic sentiment survey failed to encourage investors this morning, leaving the Euro to US Dollar (EUR/USD) exchange rate on a weaker footing.
Although the index saw some improvement on the month, picking up from -15 to -13.4, this was not enough to escape its lingering negativity.
With confidence in the outlook of both the German and wider Eurozone economies limited the Euro (EUR) struggled to find any particular support against its rivals.
Worries over potential US tariffs on Eurozone car exports also muted the appeal of the single currency, given the drag that weakening trade has already exerted on the economy.
USD Exchange Rates Look for Boost on Stronger Housing Market
The US Dollar (USD) could recover further ground this afternoon if the NAHB housing market index picks up as forecast.
Signs of a strengthening housing market should improve confidence in the underlying health of the wider US economy, giving USD exchange rates a fresh leg up.
However, the US Dollar may come under pressure as a result of comments from Cleveland Fed President Loretta Mester on the subject on monetary policy and the economic outlook.
With the Federal Reserve already looking set to adopt a more cautious outlook in the months ahead any fresh signs of dovishness could weigh heavily on USD exchange rates.
Unless Mester signals a desire to see interest rates rise again in the coming months her speech is likely to offer the EUR/USD exchange rate a boost.
US Dollar Vulnerable Ahead of Federal Reserve Meeting Minutes
The release of January’s Federal Open Market Committee (FOMC) meeting minutes may also dent the appeal of the US Dollar.
Evidence of an increasing shift towards dovishness among policymakers would expose USD exchange rates to a fresh bout of selling pressure.
Although markets already anticipate the Fed remaining on hold in the near future a cautious set of minutes would still give investors incentive to favour the Euro over the US Dollar.
Signs of policymaker confidence, meanwhile, could help the US Dollar to return to a stronger footing against its rivals.
Underwhelming Eurozone PMIs Forecast to Drag Euro Lower
EUR exchange rates look vulnerable ahead of Thursday’s raft of Eurozone manufacturing and services PMIs, following on the heels of January’s underwhelming data.
Fresh evidence that the Eurozone economy is continuing to lose its momentum could see the Euro slump sharply across the board.
Unless the German manufacturing sector climbs out of its recent state of contraction the mood towards the single currency is unlikely to improve significantly, though.
With the Eurozone looking set to experience weaker growth in the first quarter of 2019 any disappointing data may leave the EUR/USD exchange rate on a downtrend.
If commentary from the European Central Bank (ECB) also continues to adopt a dovish tone this could increase the pressure on Euro exchange rates further.