Euro to US Dollar Exchange Rate Climbs on ECB Uncertainty and USD Weakness
Despite continued fears that Germany’s economy could be in recession, the Euro to US Dollar (EUR/USD) exchange rate jumped higher today on a combination of Euro (EUR) strength and US Dollar (USD) weakness.
Since opening this week at the interbank level of 1.09, EUR/USD has seen fluctuation as investors weigh German recession fears and rising US recession speculation.
Today though, EUR/USD made a sharp movement higher from near the week’s opening levels. At the time of writing, EUR/USD was trending near the interbank region of 1.10, and its best levels since the 20th of September.
Still, German recession jitters haven’t gone anywhere, so the Euro to US Dollar exchange rate could fall again if tomorrow’s German data disappoints investors.
Euro (EUR) Exchange Rates Benefit from European Central Bank (ECB) Speculation
Concerns that Germany’s economy is in recession are keeping broad pressure on the Euro’s (EUR) market appeal, but the currency advanced today.
This was thanks to a combination of weakness in its rival the US Dollar (USD), but also a surprising mixed sentiment from the European Central Bank (ECB).
The Financial Times reported that parts of the ECB’s restarted quantitative easing (QE) scheme saw objections from ECB officials. ECB President Mario Draghi reportedly ignored advice from the committee.
It was a sign that the ECB was mixed about further dovish monetary policy, and doused market speculation for more aggressive easing.
News that EU ministers were getting closer to reaching a deal on a limited Eurozone budget also helped to boost Euro demand today.
US Dollar (USD) Exchange Rates Slide on Fed Officials Recession Concerns
The Federal Reserve cut US interest rates in September as was widely expected, but the minutes of the meeting, published last night, show that the bank’s officials were even more split than expected.
The bank eventually cut rates by a quarter-point, some officials would have preferred no rate cut, while others were more eager for a considerable half-point rate cut.
These officials noted that a half-point rate cut was more likely to prevent the possibility of a US recession.
Officials expressing concern over the possibility of a recession has been enough to spook US Dollar (USD) investors. This has been the main reason that it is falling against its rival the Euro (EUR) today.
Of course, the more dovish rumblings among Fed officials have been caused in part by signs of weakness in US economic data. Yesterday’s US wholesale inventories continued that trend by coming in at a lower than expected 0.2%.
Euro to US Dollar (EUR/USD) Exchange Rate Could Slip if German Inflation Disappoints
While the Euro to US Dollar (EUR/USD) exchange rate is climbing this week, it is more due to central bank speculation than any domestic data supporting the Euro (EUR).
The shared currency continues to see pressure amid fears that Germany’s economy fell into recession in Q3 2019.
With Germany’s September inflation rate forecast to have slowed to 1.2% year-on-year, the Euro could quickly shed some of this week’s gains if tomorrow’s finalised German inflation stats disappoint.
Weaker inflation may also cause fresh speculation that the European Central Bank (ECB) will be pressured into maintaining a dovish stance after all.
As for the US Dollar (USD), tomorrow’s US Michigan consumer sentiment stats could cause some movement.
Of course, fresh developments in US-China trade negotiations may also drive the Euro to US Dollar (EUR/USD) exchange rate in the coming sessions.