Euro to US Dollar Exchange Rate Gains Reversed by Eurozone Concerns despite Dovish Fed
The Euro to US Dollar EUR/USD) exchange rate was briefly trending higher this week, but currently trends below the week’s opening levels due to continued signs of weakness in the Eurozone economy.
Since opening this week at the level of 1.13, EUR/USD has fluctuated. While the pair briefly touched over a cent higher and its best level in over a month, it was unable to sustain those gains.
At the time of writing on Friday, EUR/USD was tumbling around a quarter of a cent below the week’s opening levels due to the Eurozone’s latest weak data.
However, the US Dollar (USD) was unable to capitalise on the Euro’s (EUR) late-week weakness, as the US Dollar has also been one of this week’s more poorly performing major currencies due to a more dovish Federal Reserve.
Euro (EUR) Exchange Rates Hit by Unexpectedly Deep Contraction in German Manufacturing
This morning saw the publication of Markit’s March PMI projections for the Eurozone, and the bloc’s manufacturing sector fared even worse rather than recovering slightly like analysts forecast.
Markit’s French manufacturing PMI unexpectedly fell into contraction, printing at 49.8. Germany’s was especially disappointing though, deepening to a contraction of 44.7 rather than lightening to 48 as expected.
Overall, the Eurozone’s manufacturing PMI worsened to 47.6, and this worsened concerns about the Eurozone’s economic slowdown and dampened hopes that the bloc’s activity was beginning to see a more positive turn.
According to Chris Williamson, Chief Business Economist at Markit:
‘… further loss of growth momentum in the second quarter compared to the 0.2% GDP rise signalled for the first three months of the year would raise doubts on the economy’s ability to grow by more than 1% in 2019.’
Amid revived concerns about this year’s Eurozone economic outlook, the Euro (EUR) slumped.
US Dollar (USD) Exchange Rates Struggle to Capitalise amid Federal Reserve Dovishness
The US Dollar’s (USD) strength has been limited this week, and the currency spent most of the week weaker until today’s concerning Eurozone data knocked the Euro (EUR).
Investors had been selling the US Dollar for most of the week on concerns that the Federal Reserve will take a more dovish tone on monetary policy.
The US Dollar saw a brief slump in the middle of the week, when the Federal Reserve did indeed take a dovish shift in its March policy decision.
The Fed indicated that it had dropped its plans to hike US interest rates at all this year, and would instead take a more cautious stance to see how the economy plays out.
However, this news was not hugely surprising to investors either, and the bank did play down the chances of interest rate cuts happening either. As a result, the US Dollar was able to hold while the Euro plummeted today.
Euro to US Dollar (EUR/USD) Exchange Rate May Find Support in Upcoming Eurozone Data
The latest Eurozone manufacturing figures were highly concerning for the Eurozone economic outlook, but if other upcoming Eurozone data is stronger than expected it may help to offset those concerns and bolster demand for the Euro (EUR).
Monday will see the publication of Ifo’s German business confidence stats for March, and if they beat forecasts they could indicate that economic activity in Germany is still likely to improve.
It will be followed on Tuesday by GfK’s German consumer confidence data, and France’s latest business confidence and growth rate figures.
Later in the week even more influential Eurozone data will be published, including Eurozone confidence, as well as inflation and retail sales figures from Germany.
Amid the major Eurozone data due next week, the Euro is more likely to drive EUR/USD movement, though some upcoming US data could influence the pair as well.
Euro to US Dollar (EUR/USD) exchange rate investors will also be keeping an eye out for US trade balance, growth rate and Personal Consumption Expenditure (PCE) data through the second half of next week.