Euro to US Dollar Exchange Rate Falls despite Stronger German Consumer Confidence
A stronger than expected German confidence report this morning was not enough to offset concerns from this week’s other Eurozone data, so strong US Dollar (USD) support has pushed the Euro to US Dollar (EUR/USD) exchange rate to near its worst levels.
Since opening this week at the interbank level of 1.10, EUR/USD has seen a downward trend due to German recession fears and safe haven demand.
At the time of writing on Thursday, EUR/USD was trending in the interbank region of 1.09 – just above September’s worst levels.
The latest optimism regarding US-China trade negotiations has bolstered US Dollar demand.
Euro (EUR) Exchange Rates Fail to Find Support in Rising German Consumer Confidence
The Euro (EUR) has been among this week’s less appealing currencies, as the latest data from the Eurozone deepens concerns that Germany has fallen into recession, and that the Eurozone’s economic downturn still has some downside in it left.
Monday and Tuesday’s German stats both worsened concerns about Eurozone manufacturing, and this morning’s German consumer confidence report from GfK has done little to offset those fears.
GfK’s October survey was expected to remain at 9.7, but unexpectedly rose to 9.9. This was not enough to notably boost Euro demand, as the details of the data showed uncertainty about the outlook persisted.
According to Claus Vistesen, Chief Eurozone Economist at Pantheon Macroeconomics:
‘Consumers in Germany are now caught between the reality of a still-solid labour market overall, and decent real wage growth, and a full-blown recession in manufacturing, which is now affecting labour market conditions in this key sector.’
US Dollar (USD) Exchange Rates Strengthen on Safe Haven Demand despite Impeachment Jitters
On Tuesday, the US Dollar (USD) briefly slumped in reaction to news that US House Democrats were preparing a formal impeachment inquiry into President Donald Trump over a controversial conversation between Trump and Ukraine President Volodymyr Zelenskiy.
It emerged that Trump had asked Zelenskiy to investigate Democratic political rival, Joe Biden.
However, as the Democratic Party only has control over the House of Congress and the Senate is majority Republican, the impeachment inquiry is not expected to lead to Trump’s removal from office.
As a result uncertainty has lightened. While markets remain jittery, the safe haven US Dollar (USD) has been able to benefit from this safe haven demand as well.
On top of this, the US Dollar is becoming more appealing amid perceived optimism in US-China trade relations. President Trump said that the US and China were having ‘good conversations’, and claimed that a deal could happen sooner than expected.
Euro to US Dollar (EUR/USD) Exchange Rate Investors Await Key US Data
The US Dollar’s (USD) latest sturdy streak could come to an end before the end of the week, if upcoming US data disappoints investors and lead to Federal Reserve interest rate cut bets.
Today will see the publication of perhaps this week’s most influential US dataset. US Gross Domestic Product (GDP) growth rate data from Q2 will be published and is expected to have slowed to 2.0% quarter-on-quarter.
It will be accompanied by US wholesale prices data which may also prove influential.
Friday will follow with the remainder of the week’s notable Eurozone and US data. Eurozone business and consumer confidence data from September will be published, with US Personal Consumption Expenditure (PCE) inflation data from August due in the afternoon.
If the Eurozone data beats forecasts if could offer the Euro a little reprieve from this week’s poor performance.
PCE data, on the other hand, could have a particularly strong influence on Fed rate cut bets and the Euro to US Dollar (EUR/USD) exchange rate if it surprises, as PCE is the Federal Reserve’s preferred inflation measure.