EUR/USD Exchange Rate Rangebound as US-China Trade Deal Hopes Improve
The Euro US Dollar (EUR/USD) exchange rate held steady this morning, with the pairing currently trading around $1.106.
Hopes for a US-China trade deal have increased following comments from the White House Economic Advisor Larry Kudlow, who said that a ‘Phase One’ deal is now ‘down to short strokes’. As a result, progress between the world’s two largest economies has clipped some of the safe-haven demand for the US Dollar.
The USD/EUR exchange rate remained unmoved, however, after Beijing agreed to lower its borrowing short-term funding rates, the first cut of its type since 2015.
Analysts at Reuters commented:
‘Growth in the world’s second-largest economy has eased to its slowest in nearly three decades and recent data such as credit growth and industrial output have continued to show a cooling economy.’
China’s easing growth has provided some support for the ‘Greenback’, which is negatively correlated to the Chinese Yuan, a currency which is losing its appeal on China’s economic downturn.
Julian Evans-Pritchard, Senior Economist at Capital Economics, said:
‘With economic growth still slowing and unlikely to bottom out in the near-term, we think the [People’s Bank of China] will take further steps to shore up lending, which has weakened recently.’
EUR/USD Exchange Rate Steady, ECB Rate Cut Fears Increase
The Euro (EUR) failed to gain on the US Dollar (USD) with investors’ feeling apprehensive ahead of today’s speech from the European Central Bank’s (ECB) Chief Economist, Philip Lane, who recently noted that the bank’s monetary policy was not at its lower bound, suggesting potential interest rate cuts.
After last week saw the German economy narrowly avoid a technical recession, market confidence in the single currency still remains weak as the Eurozone’s powerhouse economy still remains fragile.
Andreas Scheuerle, a Bank Analyst at Deka, commented:
‘The German economy got away with a black eye [but the economy is] suffering from enormous global political uncertainty.’
With no Eurozone economic data due out today, the EUR/USD exchange rate is likely to remain dictated by global political and economic developments as well as the UK’s ongoing political developments ahead of the 12th December general election.
Any signs that the British Conservative Party can consolidate their lead ahead of Labour and the Liberal Democrats would benefit for the Euro on a return of political stability around Brexit.
EUR/USD Outlook: Could USD Sink on Increasing Risk Appetite?
US Dollar (USD) investors will be looking ahead to tomorrow’s release of the US building permits figure for October, which is expected to ease slightly from 1.391 million to 1.387 million.
Tomorrow will also see the release of October’s US housing starts, which are expected to improve at 1.32 million on the month.
Meanwhile, Euro (EUR) traders will be awaiting tomorrow’s publication of September’s Eurozone construction output figure, which is expected to improve from -0.46% to 0.7% month-on-month.
US-China trade developments will continue to drive the EUR/USD exchange rate this week, with any signs of a ‘Phase One’ trade deal being struck likely weakening the ‘Greenback’ on a boost in market risk appetite.