- EUR USD Flat lines – Euro struggles to advance as Italian referendum looms.
- US Dollar Resilient ahead of Fed Meeting – Fed rate hike bets prevent US Dollar losses.
- Eurozone Manufacturing PMI – Euro strengthens as factory growth in line with expectations.
- US Manufacturing Data – US Dollar may gain if report rises as expected.
The Euro US Dollar (EUR USD) exchange rate steadied this morning after slipping from yesterday’s best levels as the single currency was pressured by the upcoming Italian referendum.
Euro US Dollar (EUR USD) Muted in Advance of Italian Referendum
Euro (EUR) exchange rates continue struggling over speculation that Sunday’s referendum on constitutional changes in Italy could lead to Prime Minister Matteo Renzi’s resignation.
Renzi has previously vowed to resign if his planned reforms are defeated in Sunday’s referendum, with current polls suggesting that Italy is increasingly likely to reject the changes, markets fear that Italy will soon face a change of government.
This is disconcerting news for investors as that the recent rise of populism in Europe could lead to populist opposition party the Five Star Movement gaining power if a general election is called, a worrying prospects for the European Project as the party has been openly hostile towards the EU in the past.
This has led to worries that Italy could split from the EU, amid rising fears that France could do the same if Marine Le Pen, leader of France’s National Front, wins next year’s French Presidential election. Such a turn of events would place considerable pressure on the Euro.
US Dollar (USD) Resilient as Fed Rate Hike Approaches
The US Dollar (USD) remains strong ahead of this month’s Federal Reserve’s rate decision as markets currently place the odds that the Fed will vote for a December rate hike at around 96%.
The near certainty that the Fed will raise interest rates this month has prevented any major losses for the ‘Greenback’ as investors hold their positions.
Eurozone Manufacturing PMI helps to Bolster Euro
The Euro started recording some slight gains this morning however as Markit released its latest Eurozone Manufacturing PMI report.
Data showed that manufacturing rose to its highest levels since January 2014 as it climbed from 53.5 to 53.7 in October, in line with predictions. The growth was largely driven by the Netherlands, Austria and Spain, but concerns were again raised by Europe’s largest economy as German manufacturing unexpectedly fell from 55.0 to 54.3 in November.
Italy’s latest GDP figures also impressed as they rose from 0.9% to 1.0% in the third-quarter. However the growth was only able to shore up the Euro’s gains as lingering worries about the Italian banking sector mean that the data was unable to propel the Euro any higher.
EUR USD Exchange Rate Forecast: US Manufacturing Data Ahead
The EUR USD exchange rate may begin to slide again later today as the ISM releases its latest US Manufacturing PMI report.
Markets currently predict that November’s data will show a slight rise from 51.9 to 52.2, helping to bolster the US Dollar. However any rise or fall in the data is unlikely to impact EUR USD that greatly due to the upcoming Fed rate decision, which is seen as such a sure bet that no data could alter it at this time.
Current Interbank Exchange Rates
At the time of writing the EUR/USD exchange rate was trending around 1.06 and the USD/EUR exchange rate was trending around 0.94.