- EUR USD Advances Ahead of Elections – Investors nervous as they fear a Trump Presidency.
- Eurozone PMIs Mixed – Euro gains may be muted by disappointing PMI data.
- Will US Unemployment Rate Fall? – US Dollar may receive slight boost if employment improves.
The EUR USD exchange rate has continued its steady rise over the last week as the US Dollar (USD) is bludgeoned in the markets due to political uncertainty in the run up to the US elections.
US Dollar (USD) Down amid Political Chaos
US Dollar (USD) exchange rates are suffering ahead of the US presidential elections next week as markets fear the impact of a possible victory for Republican candidate Donald Trump.
Michael Hewson, chief market analyst at CMC Markets UK, gives his view;
‘With only a few more days to US polling day the closeness of the polls continues to jangle nerves in the market. This negative sentiment is also spilling over into Europe’s markets as they also slip back as the weaker US Dollar pushes up the Euro, as we look again at the potential for another negative open this morning.’
These recent jitters have been caused by the announcement that the FBI would be opening a new investigation into Democratic candidate Hillary Clinton’s use of a private email server during her time as US Secretary of State. This has caused recent polls to narrow Clinton’s lead to just two points – making it a very real possibility that outsider Trump could snatch a last minute victory.
With the Euro (EUR) being the other half of the most traded currency pairing in the world, the US Dollar’s current weakness has allowed the single currency to make significant advances.
Euro (EUR) US Dollar (USD) Advance Slows on Lacklustre Eurozone PMI Data
The Euro has found its recent rally against the US Dollar (EUR USD) hindered somewhat today following the release of a slew of Eurozone PMI’s.
While the German services PMI impressed as it unexpectedly rose from 54.1 to 54.2 in October, the same cannot be said of both Italy and France’s Data. France’s latest services PMI fell to 51.4, down from forecasts that it would remain at 52.1. Italy’s service PMI did in fact rise to 51.0 – up from 50.7 the previous month, but still disappointed investors as it fell short of predictions of 51.5.
This caused the overall Eurozone services PMI to fall to 52.8 after it was forecast to remain at 53.5 in October, increasing fears that the European Central Bank may extend its monetary easing policy past March 2017 as the Eurozone economy appears to be slowing down.
EUR USD Exchange Rate Forecast: US Dollar Likely to Rise if Employment Data Impresses
The EUR USD exchange rate could slide later today if US domestic data shows an expected drop in unemployment figures. Current forecasts predict that the Unemployment rate will fall to 4.9% in October, down from 5.0% the month before, as nonfarm payrolls rose from 156k to 175k in the same period.
A rise in employment would also see the US Dollar strengthen thanks to improved bets that the Federal Reserve will raise interest rates in December, after Fed chair Janet Yellen previously mentioned that a rate hike would be dependent on a healthy US jobs market.
With no other Eurozone data in this week’s calendar it is unlikely that the Euro will be able to gain much more upward momentum against the US Dollar.
Current Interbank Exchange Rates
At the time of writing the EUR/USD exchange rate was trending around 1.10 and the USD/EUR exchange rate was trending around 0.90.