EUR/USD Exchange Rate Post-Payroll Gains Evaporate
(Updated: 16:30, 8/8/23) The Euro US Dollar (EUR/USD) exchange rate remains on the back foot as we near the end of today’s European trading session.
EUR/USD has now shed all of the gains made since the publication of July’s disappointing US payroll figures on Friday.
The continued uptick in the US Dollar comes as China’s abysmal trade figures spark a wider sell off across equity markets.
The continued slump in EUR/USD sees the pairing close to testing $1.08 for the first time in over a month. A barrier which could easily be passed later tonight if China’s latest inflation figures also disappoint.
Original article continues below:
Euro US Dollar Exchange Rate Undermined by Slide in Risk Appetite
The Euro US Dollar (EUR/USD) exchange rate is on the defensive this afternoon as a gloomy market mood disproportionately benefits the ‘Greenback’.
At the time of writing the EUR/USD exchange rate is trading at around $1.0942. Down roughly 0.5% from this morning’s opening levels.
US Dollar (USD) Bolstered by China’s Disappointing Trade Data
The US Dollar (USD) is firming this morning as demand for the safe-haven currency is underpinned by a downbeat market mood.
Sentiment has soured in the wake of China’s latest trade data. July’s figures reported larger-than-expected declines in both imports and exports. Imports contracted by 12.4% against forecasts for a 5% slump. While exports fell 14.5%, their largest decline since the start of the Covid pandemic.
The abysmal trade figures reignited concerns over China’s post-Covid recovery. Which alongside signs a widespread fall in consumer demand, stokes concerns over global economic growth and bolsters the appeal of the safe-haven US Dollar.
Julian Evans-Pritchard, head of China economics at Capital Economics, said:
‘Most measures of export orders point to a much greater decline in foreign demand than has so far been reflected in the customs data.
‘And the near-term outlook for consumer spending in developed economies remains challenging, with many still at risk of recessions later this year, albeit mild ones.’
However, the US Dollar’s gains may have been tempered somewhat by a fall in US Treasury yields.
Euro (EUR) Muted Following Drop in German Inflation
The Euro (EUR) is struggling to hold its ground against the US Dollar (USD) today, following the publication of Germany’s latest consumer price index.
July’s finalised CPI figures confirmed inflation in the Eurozone’s largest economy slowed to 6.2%. The slowdown is further undermining expectations the European Central Bank (ECB) will raise interest rates again when it next meets in September.
Elsewhere the Euro is also facing resistance following the announcement that Italy seeks to impose a 40% windfall tax on banks. Profits in the European banking sector have surged as the ECB propelled interest rates to a record high.
The news has spooked EUR investors, amid concerns other nations in the Eurozone could follow suit, and this could make the bloc less attractive to investors.
Euro US Dollar Exchange Rate Forecast: US Inflation in the Spotlight
Looking ahead, the Euro US Dollar exchange rate may continue to drift lower on Wednesday. Investors are likely to remain cautious as they await the publication of the latest US CPI figures later in the week.
An expected uptick in inflation may revive hopes the Federal Reserve will raise interest rates at least once more this year. This in turn could see the US Dollar extend its gains.
Meanwhile, in the absence of any notable Eurozone data, the Euro may struggle to hold its ground against the US Dollar.