EUR/USD Exchange Rate Rallies on Uneven US Data
The Euro US Dollar (EUR/USD) exchange rate has risen this afternoon, following the publication of some mixed US economic releases.
At the time of writing, the EUR/USD exchange rate is trading at around €1.0948, up roughly 0.4% from this morning’s opening rate.
US Dollar (USD) Stumbles as US Data Makes for Mixed Reading
The US Dollar (USD) suffered from some whiplash today following the publication of the latest US economic data.
USD exchange rates looked to be closing the week on a positive note following the publication of the latest US non farm payroll data.
The report showed that the US economy added 216,000 jobs in December, up from the downwardly revised 173,000 in November, outpacing forecasts that 170,000 jobs would be added.
USD investors welcomed the better-than-expected US jobs data as it helped push back on bets for interest rate cuts from the Federal Reserve in early spring.
Lead equity analyst at Hargreaves Lansdown, Sophie Lund-Yates said:
‘There are a few vital signs officials can monitor when trying to diagnose the health of the economy, and the labour market is a crucial one. Developments show that the US labour market isn’t losing steam, ultimately suggesting that economic activity will need a heavier hand to slow it down. That could see interest rate cuts across the pond pushed further out than hoped – bad news for the market, which until recently was pricing in heavy cuts this year.’
However, the US Dollar’s gains were also immediately reversed with the publication of the ISM services PMI. With growth in the US service sector slowing to a crawl in December, the odds of a March rate cut began to rise again.
Euro (EUR) Quiet despite Rising Inflation
While it is up against the US Dollar, the Euro (EUR) is struggling to replicate this success against its other peers today, despite the Eurozone’s latest consumer price index reporting a sharp increase in inflation.
The CPI reported that inflation rose to 2.9% in December, leaping up from November’s two-year low of 2.4%, but importantly missing forecasts that it would climb to 3%.
December’s index also reported core inflation dipped from 3.6% the month prior, to 3.4%.
Today’s report has re-ignited European Central Bank (ECB) interest rate speculation, with the first rise in inflation since April potentially giving the bank more time before it needs to start cutting rates.
EUR/USD Forecast: Uptick in German Factory Orders to Boost EUR/USD?
Looking ahead, the Euro US Dollar exchange rate may strengthen at the start of next week if upcoming German industrial data prints positively.
Germany’s latest factory orders figures will be released on Monday. The data is expected to show a surge in order growth, from -3.7% in October to 1% for November. With manufacturing being a key part of the German economy, this could bolster the single currency.
Across the Atlantic, the US Dollar will see limited market moving data at the start of next week’s trading session, and may trade on market mood alone. Should today’s cautious sentiment continue, we could see the safe haven currency strengthen.
