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EUR USD Exchange Rate Recovers on Eurozone Banking Optimism

The Euro has lost ground against the US Dollar today, declining to a slightly lower exchange rate of 1.1790. This marginal weakening comes after ahead of Tuesday’s German industrial production figures.

On the month a surplus expansion is expected, but traders remain unsure of how the increasingly aggravated US administration will react to such a consistent surplus figure.

(First published 09:53, August 7th, 2017)

The Euro has advanced by 0.3% against the US Dollar today, following news of a ‘turning point’ being reached by Eurozone banks.

  • EUR USD rate hits 1.1802 – USD EUR trades down at 0.8472
  • Euro boosted by improving bank outlooks – German industrial decline fails to dent EUR
  • US Dollar declines on Chinese concerns – Trade expert uncertain of plans to challenge China
  • Further Euro gains possible on German news – Higher US inflation could boost Fed rate hike odds

At a rate of 1.1802, the Euro remains down against the US Dollar from the 1.1900 figure seen in early August, but still near the best exchange rate in over two years.

Euro Advances despite German Data Handicap

The biggest direct Eurozone news today has been negative, showing a -1.1% drop in German industrial confidence in June. Estimates had been for a slowdown to 0.2%, so this result has been considered an especially negative one.

That said, the Euro has still risen across the board today thanks to comments from World Economic Forum member Huw van Steenis.

Van Steenis has observed that;

‘The Eurozone has just enjoyed its best quarter for economic growth in five years — twice that of the UK. Eurozone banks have also outperformed the broader market for the first year since 2009.

Not only has the Eurozone economy turned out to be stronger and more balanced than investors expected but there were no new spanners in the works: no populist governments, no spillover from resolving problematic Italian and Spanish banks, no return to deflation fears’.

US Dollar Update: Optimism from Jobs Boom Starts to Fade

The US Dollar has dipped by -0.3% against the Euro today, owing to concerns about national tensions with China.

Previously, the US Dollar rallied when non-farm payrolls figures printed higher-than-forecast.

As North Korea continues to develop its missile program with impunity, US diplomats have increasingly pressured the Chinese government to rein in its southern neighbour.

The latest worrying development has been trade-focused, with a former US trade negotiator criticising the idea to target China with an intellectual property investigation.

According to Charlene Barshefsky, going toe-to-toe with China would put US businesses under pressure;

‘When China is displeased with US actions…you see China act in ways that are very aggressive, designed to intimidate, designed to force the US to back down. The US rarely backs down, which is absolutely correct – it should not. Then the question is: “What is the next move?” And, “How much more heated does this get?”.

There will be a lot of very heated and aggressive rhetoric on both sides, there is no question about it…[And] China will likely not just talk the talk but they will begin to walk the walk, and before too long US companies will start complaining about being even further ill-treated in China.

Not blocked; not retaliated against in any large sense. But the environment will become more and more difficult. And China will do that as a way of pressuring the US to back off’.

Weekly EUR USD Outlook: German Trade and Inflation Stats Upcoming

With the main US data this week not coming until Friday, high-impact German news will remain the main source of influence until then.

Following today’s industrial figures, Tuesday will see the German trade balance announced. Estimates are for a surplus expansion, for both the base and seasonally-adjusted figures.

While the continued German trade surplus has been criticised by some, such results would still be good news for the national economy.

Euro traders are also primed for Friday’s German inflation rate figures, which are expected to print positively. As a further demonstration of Germany’s economic strength, finalised inflation is estimated to have risen during the month in July as well as annually.

On the other side of the pairing, US inflation rate figures will also be in focus on Friday. In July, annual inflation is predicted to have risen from 1.6% to 1.8%. Such a rise could inspire sudden USD EUR gains on Friday, as it would raise the chances of a near-term Federal Reserve interest rate hike.

Current Interbank EUR USD Exchange Rates

At the time of writing, the Euro to US Dollar (EUR USD) exchange rate was trading at 1.1802 and the US Dollar to Euro (USD EUR) exchange rate was trading at 0.8472.