Euro to US Dollar Exchange Rate Sliding amid Brexit and Central Bank Uncertainties
While the Euro to US Dollar (EUR/USD) exchange rate surged last week, this came despite a lack of strong domestic support for the Euro (EUR). With the Eurozone outlook still weighed by growth fears and Brexit uncertainties returning, the pair has been sliding this week.
Last week saw EUR/USD surge from the interbank rate of 1.10 and gain over a cent, closing the week at the level of 1.11.
Since briefly touching a near 2-month-high on Monday though, EUR/USD has been weakening. EUR/USD has lost half a cent so far this week, and around a third of last week’s impressive gains.
Investors are hesitant to buy the Euro amid a lack of support, as well as fresh political and economic uncertainties surrounding Brexit and the upcoming European Central Bank (ECB) decision.
Euro (EUR) Exchange Rates Lack Support as Brexit Uncertainty Returns
Much of the Euro’s (EUR) recent strength against its rival, the US Dollar (USD), has been due to market hopes that a relatively soft resolution to the Brexit process was within reach.
However, as UK Prime Minister Boris Johnson’s attempt to fast-track his new Brexit deal was blocked by UK Parliament, expectations for a fresh Brexit delay and months more political uncertainty rose.
This has put fresh pressure on the Euro in recent sessions, as the Euro was benefitting from hopes of continued post-Brexit relations between the UK and EU.
In terms of domestic news, investors were hesitant to buy the Euro amid concerns of continued economic slowdown in Germany and the Eurozone as a whole.
Markets are also anxious as they await the final policy decision of Mario Draghi’s term as European Central Bank (ECB) President, though the bank’s outlook is not expected to change much.
US Dollar (USD) Exchange Rates Firm on Rival Weakness and Safe Haven Demand
As the Euro (EUR) is the US Dollar’s (USD) biggest rival, the shared currency’s fresh losses this week have benefitted US Dollar strength.
The US Dollar has also been benefitting from global factors as a safe haven. The US Dollar is a safe haven currency that is often appealing in times of political or market uncertainty.
As a result, the latest Brexit developments, as well as slow but optimistic US-China trade developments, have supported the US Dollar’s safe haven appeal this week.
Still, US Dollar gains were limited as well, as Federal Reserve interest rate cut bets remain high and the latest US existing home sales data was disappointing as well.
Euro to US Dollar (EUR/USD) Exchange Rate Awaits Key Data and European Central Bank (ECB)
While the Euro to US Dollar (EUR/USD) exchange rate’s movement has been driven by politics and global factors this week so far, the focus for the pair is likely to shift to domestic data and economic news towards the end of the week.
Thursday will see the publication of much of the week’s most influential Eurozone and US ecostats, including PMI projections for October.
Markets will pay special attention to German manufacturing PMI projections, which are expected to come in with a slightly lighter but still concerning contraction of 42.
If German manufacturing improves more than expected, it could bolster hopes that the Eurozone’s biggest economy is recovering from a potential recession, and the Euro (EUR) would see stronger demand.
The European Central Bank (ECB) will also hold its October policy decision tomorrow – the final decision of outgoing ECB President Mario Draghi.
The bank is not expected to make any notable shifts in tone in Draghi’s final meeting, but markets will be watching closely regardless. Draghi will be succeeded by ex-IMF Director Christine Lagarde in November.
There is plenty for Euro investors to react to, but upcoming US durable goods orders stats and Markit PMI projections could also influence the Euro to US Dollar (EUR/USD) exchange rate.