EUR/USD Exchange Rate Flat as Eurozone’s Economic Woes Continue
The Euro US Dollar (EUR/USD) exchange rate steadied today at a near-two year low, with the pair fluctuating around $1.098 as economic woes continue to haunt the Eurozone.
This followed publication of the Eurozone’s Markit Composite PMI for August which beat forecasts and rose from 51.8 to 51.9 but failed to rejuvenate market sentiment in the single currency.
Chris Williamson, Chief Business Economist at IHS Markit, was downbeat in his assessment, saying that the Eurozone remained ‘mired in a fragile state of weak and unbalanced growth’. He added:
‘The picture remains very mixed both by sector and country, highlighting how downside risks persist. A fierce manufacturing downturn, fuelled by deteriorating exports and most intensely felt in Germany, continues to be offset by resilient growth in the service sector, in turn propped up to a large extent by solid consumer spending in domestic markets.’
In political news yesterday, Euro traders welcomed the formation of a new government in Italy, with the Five-Star Movement voting overwhelmingly in favour of a coalition with the centre-left Democratic Party. Consequently, Italy will now avoid a snap election.
The Euro also saw some benefits when a no-deal Brexit was challenged in the UK House of Commons, with opposition MPs regaining control of parliament and successfully tabling a bill which will effectively block a no-deal Brexit.
USD/EUR Exchange Rate Rangebound Ahead of Fed Speeches
The US Dollar (USD) failed to gain on the Euro (EUR) today with ‘Greenback’ traders showing caution before an afternoon of speeches by Federal Reserve policy makers. USD investors will be looking for any policy change signals ahead of the central bank’s 18 September meeting.
The ongoing US-China trade war continues to haunt US markets, with this afternoon’s US trade balance report likely to reveal the full extent of damage inflicted on the US economy and feeding into fears for a US recession.
But Steven Mnuchin, the Whitehouse’s Treasury Secretary, refuted recession forecasts:
‘I don’t think the yield curve reflects a recession. I think the yield curve reflects the fact that it anticipates the Fed is going to lower short-term rates.’
EUR/USD Outlook: Euro Could Rise if No-Deal Brexit Ruled Out
Tomorrow’s German factory orders for July are expected to decline by -1.1% and could see the single currency sink further against the US Dollar.
Tomorrow’s ISM Non-Manufacturing PMI for August, meanwhile, is expected to rise from 53.7 to 53.9, offering a potential boost to the USD/EUR exchange rate.
The US jobs figures will also be published tomorrow.
UK political developments are likely to drive EUR/USD exchange rates over the next few days, with any signs of opposition MPs successfully blocking a no-deal Brexit benefitting the European currency.