- German Consumer Confidence Up – Unexpected score boosts Euro
- US Durable Goods Disappoint – Run of poor US data continues
- US Consumer Confidence Slips – Consumers less confident than expected in April
- Forecast: FOMC Decisions in Full Focus – Investors fear rates being kept on hold
EUR/USD Strength Continues Throughout Wednesday
Investors are awaiting the Federal Open Market Committee (FOMC) meeting with anxiety as they adjust their positions on the US Dollar.
The EUR/USD exchange rate, still stronger on German consumer confidence and a weakening US Dollar, has traded quite flatly since earlier, still up at around 0.2%.
The Euro’s advance was slowed by optimistic US data released this afternoon, including a positive pending home sales report of 2.9% year-on-year, well up from the forecast 0.8%.
Crude oil inventories also proved to be bigger than expected, coming in at 1999k. With positive US data today, the pair is likely to recover considerably if the Fed announces plans to hike rates soon. If it doesn’t, the US Dollar’s attempts to hold its ground may be futile.
The Euro to US Dollar (EUR/USD) exchange rate was able to gain considerably on Tuesday as a slew of poor US data saw investors fleeing to the previously stagnant Euro ahead of concerns that Wednesday’s FOMC decision would decrease rate hike bets.
EUR/USD briefly leapt to a new weekly high on Tuesday afternoon, gaining over 60 pips and reaching 1.1335. The pair currently trends at around 1.1315, up 0.2% on the day’s opening levels.
German GfK Consumer Confidence Offers Boost to Uninspired Euro (EUR)
The Euro has been struggling to maintain gains as investor frustration with the European Central Bank’s (ECB) dovish attitude made the shared currency look unappealing.
However, data released on Wednesday morning seems to have lifted some weight from investors’ shoulders and improved the Euro’s appeal against its US rival.
Most vitally was May’s release of the German GfK consumer confidence survey, which had initially been forecast to hold steady at its April score of 9.4. The report surprised investors when it printed at 9.7.
Other Eurozone data including March’s German import price index report also printed decently, and without a considerably weak print the Euro was encouraged to advance.
Decreased bets that the UK will leave the European Union may have also helped the Euro’s strength improve, as analysts recently claimed that a ‘Brexit’ would have large ripple-effects on the Eurozone.
US Dollar (USD) Investors Wary after Low Goods Orders, Consumer Confidence
Investor anxiety towards the US Dollar is peaking this week as last week’s negative ecostats are followed up by even more poor data so far this week.
Tuesday’s highly anticipated preliminary durable goods report came in to show a smaller-than-expected 0.8% increase in orders. While improved from the previous contraction of -3.0%, it let down hopes of a 1.9% improvement.
Perhaps more worryingly was April’s US consumer confidence score released later in the day. Shrinking from 96.2 to 94.2, it undercut the projected slip to 96.0 and indicated considerably lower-than-expected confidence in consumers, something investors feel will negatively affect the Federal Reserve’s chances of increasing interest rates any time soon.
Other important data from Tuesday included the durable goods excluding transportation report, which showed a -0.2% contraction instead of scoring a positive 0.5% as expected.
All the negative data weighed on investor hopes of today’s upcoming Federal Open Market Committee (FOMC) policy meeting. According to Reuters, policymakers are not expected to hike interest rates now;
‘The US Federal Reserve is expected to keep interest rates unchanged on Wednesday as it continues to monitor the impact from weakening global growth but may seek to signal to markets it is determined to resume policy tightening this year.’
Euro to US Dollar (EUR/USD) Exchange Rate Forecast: Will the Fed Hint at Rate Hikes?
Wednesday’s session is set to be a particularly busy one for US investors, as the Federal Reserve is set to meet later in the evening and outline fiscal policy for the world’s most influential economy.
Eurozone data is quiet until Thursday, where key prints including German retail sales, German unemployment and German CPI are due to be released.
The US economic calendar, on the other hand, is bustling until the end of the week. Today sees the release of MBA mortgage applications, pending home sales, new crude oil inventory data and, most vitally, the Federal Open Market Committee (FOMC) rate decision.
The Fed is currently not expected to hike interest rates, but many analysts expect it will indicate when the next hike could occur.
The US Dollar is likely to plummet if rate hikes are pushed back further in the year, but could recover if the Fed hints at a sooner-than-expected hike.
The Euro to US Dollar (EUR/USD) exchange rate currently trades at around 1.1314, while the US Dollar to Euro (USD/EUR) exchange rate trends within the region of 0.8836.