Euro US Dollar Exchange Rate Wavers after Better-than-Expected US Data
The Euro US Dollar (EUR/USD) exchange rate remains on the defensive today in the wake of strong US economic data yesterday. Federal Reserve rate hike expectations climbed back up, lending support to the ‘Greenback’.
At time of writing the EUR/USD exchange rate is trading around $1.0525, relatively unchanged from this morning’s opening levels.
US Dollar (USD) Quiet Despite Elevated Rate Hike Expectations Return
The US Dollar soared yesterday in the wake of a flurry of promising and better-than-expected data. Both factory orders and non-manufacturing PMI surprised on the upside, lending support to further rate hikes.
However, with a relatively quiet data calendar today, the ‘Greenback’ lost most of its gains amid improving risk sentiment. Further positive news out of China as Beijing have announced that residents will no longer require tests before entering supermarkets and offices.
Following a wave of unprecedented protests over the strict zero-Covid stance from the Chinese government, restrictions appear to be easing. Risk sentiment could improve after over two years of economic disruptions due to the strict lockdowns, hampering the US Dollar.
Euro (EUR) Undermined by Mixed Economic Data
Meanwhile, the Euro saw some mixed data released this morning, failing to inspire much movement.
Following yesterday’s downbeat economic data, German factory orders surprised on the upside and printed better than expected. Europe’s largest economy exceeded expectations of a 0.1% rise and came in at 0.8% MoM in October. Factory orders expanded for the first time since July and gave some much needed hope for the economy.
However, keeping in line with yesterday’s poor PMI figures, Eurozone construction PMI printed lower than expected. Indicating a seventh month of contraction, construction activity fell to 43.6, the strongest decline since May 2020. S&P Global economist Laura Denman, added:
‘Overall business sentiment among eurozone constructors remained deeply pessimistic in the penultimate month of the year amid concerns surrounding demand weakness and the ongoing cost of living crisis. Input prices also continued to rise at a historically sharp pace in November.’
Euro US Dollar Forecast: US Jobs Data and PPI to Influence the Fed?
Looking ahead, the Euro US Dollar exchange rate could see further fluctuations as the market shifts its focus to the Fed interest rate decision next week. With a flurry of data releases this week, the Fed could reassess their position if more data surprises to the upside.
Both labour market data and PPI inflation are due to print in the latter stages of the week. Despite inflation finally showing signs of cooling, core PPI is expected to rise, which could push the Fed to raise interest rates higher.
Meanwhile, the Euro could see some increased movement with the release of GDP growth data tomorrow. An expected slowdown in economic growth could weigh on the single currency.