Euro US Dollar Exchange Rate Forecast: EUR/USD Muted as EU Politics Remains in Spotlight

EUR/USD Exchange Rate Flat on EU Uncertainty

The Euro to US Dollar (EUR/USD) exchange rate is struggling to find momentum this morning as the single currency remains paralysed by indecision at the top of the EU.

At the time of writing EUR/USD exchange rate is virtually unchanged this morning, leaving the pairing trading close to a 10-day low at $1.1289.

Euro (EUR) Exchange Rates Flat as EU Leaders Remain Split on Top Jobs

The Euro (EUR) is struck trading in a narrow range against the US Dollar (USD) and many of its other peers this morning as the ongoing uncertainty over who will take over a number of top posts within the EU leaves EUR investors nervous.

EU leaders will meet again in Brussels today, following a marathon summit over the weekend that saw leaders fail to agree on who should be given the role of European Commission President and a number of other top positions within the EU when they are vacated later this year.

Further limiting the appeal of the Euro this morning was the publication of Germany’s latest retail sales figures.

While the dramatic contraction in sales in April was revised down from -2% to -1% EUR investors were ultimately left disappointed as sales growth failed to rebound as expected in May, instead registering another 0.6% slump.

US Dollar (USD) Steady on Trade Concerns

Meanwhile, the US Dollar (USD) is clinging to the gains it made on Monday as optimism on US-China trade was curbed by suggestions that a trade deal is still a long way off.

While the trade truce signed over the weekend was welcomed by USD investors, markets remain all too aware of the damage already caused by the long-running trade dispute on the global economy.

With this in mind analysts warn that the chances of the Federal Reserve lowering interest rates by up to 50 basis points this month remain elevated, with CME’s FedWatch tool suggesting there is at least a 25% chance of such a cut.

EUR/USD Exchange Rate Forecast: Slide in Services PMI to Drag on the US Dollar?

Looking ahead, we may see the Euro US Dollar (EUR/USD) exchange rate attempt to rally on Wednesday following the publication of the ISM non-manufacturing PMI.

The index is expected to show that activity in the US service sector softened last month, likely fueling concerns that US economic growth will have slowed in the second quarter.

However potentially offsetting any downside in USD will be the publication of the US ADP employment report, as economists forecast domestic employment growth will have jumping in June following a worrying slump in May.

Meanwhile, the Euro may strengthen in the latter half of the week, with the publication of the Eurozone’s retail sales figures, with economists forecasting that sales will have returned to growth in May following a modest slump at the start of the second quarter.

Matthew Andrews

Contact Matthew Andrews