The Euro began the day locked in a bearish relationship with the US Dollar as concerns of European Central Bank intervention lessened the appeal of the common currency.
Last week’s below-forecast inflation data for the Eurozone, and the expectation that the ECB might introduce additional stimulus measures to combat slowing price rises, left the Euro close to a two-month low against the US Dollar.
This morning one Tokyo-based currency strategist stated; ‘I’d recommend selling Euro-Dollar on a rebound. There’s a good chance of additional monetary easing in the Euro region if disinflation persists.’
However, over the course of European trading the Euro recovered losses against its US counterpart. The Euro broadly strengthened after measures of manufacturing for Germany and the Eurozone showed expansion while the manufacturing PMI for France showed a slower-than-forecast pace of contraction.
EUR/USD gains were consolidated and extended after US data fell short of forecasts, indicating that the recovery of the world’s largest economy is faltering.
Although US construction spending advanced by 0.1 per cent rather than stagnating in December as forecast, November’s month-on-month gain was negatively revised to 0.8 per cent.
The final Markit US PMI reading came in at 53.7 in January rather than the 53.9 forecast and US ISM manufacturing dropped from a negatively revised 56.5 to 51.3 rather than meeting estimates for a reading of 56.0.
The less-than-impressive results prompted ‘Greenback’ losses and inspired this response from forex strategist Lee Hardman; ‘There’ll be some weakness of growth in quarter one as the kind of pace we saw in the second-half is unlikely to sustain.’
We forecast that the EUR/USD pairing will close the local session in a stronger position.
In other currency news, the Pound declined against several of its major rivals as a gauge of UK manufacturing dipped.
Tomorrow EUR/USD movement is most likely to be driven by US factory orders data, although investors will also be looking ahead to Wednesday’s services PMI figures and retail sales report for the Eurozone and US ISM non-manufacturing data.
Euro (EUR) Exchange Rates
|Euro||New Zealand Dollar||1.6667|