- Euro Dollar Exchange rate Nears 1.18 – Recovers in quarter-end-fixings
- Euro Supported by Domestic Data – Investors overlook underwhelming retail stats
- EUR Forecast: Eurozone Unemployment Ahead – As well as retail sales
- USD Forecast: Non-Farm Payrolls Next Week – Could influence economic outlook
Updated 16:55 BST 29/09/2017:
The Euro Dollar exchange rate touched above the level of 1.1810 on Friday afternoon, before European markets closed for the week.
Despite disappointment in the Eurozone’s September inflation projections, EUR USD continued to recover from its lows.
This was largely because the US Dollar continued to be sold from its highs, due to a disappointing US PCE price index report from August.
August’s PCE results remained at 1.4% year-on-year, failing to improve to the forecast 1.5%. The monthly figure rose from 0.1% to 0.2%, but missed the expected 0.3%.
Michigan University’s September consumer sentiment survey also disappointed, dropping to 95.1.
[Published 11:01 BST 29/09/2017]
After months of consecutive gains for the Euro Dollar exchange rate, higher Federal Reserve interest rate hike bets and US tax reform speculation has finally led to a stronger performance from the US Dollar. The Euro recovered from its lows due to decent domestic data.
EUR USD began the week at the level of 1.1950 and lost around two cents to hit a two-month-low of 1.1718 on Wednesday. Since then the pair has edged higher and on Friday morning the pair was trending nearer the key level of 1.18.
Euro (EUR) Supported by German Unemployment Rate
Last Sunday’s German 2017 federal election ended in uncertainty, as despite winning the most votes, German Chancellor Angela Merkel didn’t win enough to be able to easily form a new coalition government.
Germany’s political uncertainty has kept pressure on the Euro for much of the last five days, as investors are anxious that it may take weeks or even months for Merkel to negotiate a coalition to run the government.
However, on Thursday and Friday markets cooled slightly and the Euro edged higher from its lows.
Some recent Eurozone data was strong enough to support the shared currency.
September’s Eurozone business confidence surveys beat expectations in most major prints. The business confidence figure was forecast to rise from 1.09 to 1.11 but jumped from a revised 1.08 to 1.34.
Industrial sentiment rose from 5 to 6.6, services from 15.1 to 15.3 and economic sentiment from 111.9 to 113. All these figures beat forecasts.
The consumer confidence data was solid too. Consumer confidence improved from -1.5 to -1.2 as expected and consumer inflation expectations rose from 11.6 to 14.2.
Friday morning saw the publication of Germany’s key September unemployment results, which beat expectations too. The unemployment change jumped from -6k to -23k and as a result the unemployment rate surprised by improving from 5.7% to 5.6%.
However, the Euro’s gains were limited by other underwhelming Eurozone ecostats on Friday. Germany’s August retail sales results were disappointing and the Eurozone’s September inflation projection remained at 1.5% rather than improving to 1.6% as expected.
This worsened concerns that Eurozone inflation would not be strong enough to support higher interest rates from the European Central Bank (ECB) any time soon.
US Dollar (USD) Slips Back After Recovery Rally
Since Monday, the US Dollar has seen stronger demand and perhaps its best week for gains all year.
Its gains were largely due to an increase in bets that the Federal Reserve could still hike US interest rates a third time in 2017, and it was able to capitalise on the Euro’s politically-influenced weakness.
If the Euro hadn’t been weak, the US Dollar’s recovery may not have been nearly as influential
Federal Reserve Chairwoman Janet Yellen took a hawkish tone in her latest speech, indicating that even if the bank had misjudged the health of US inflation and the US jobs market, it was still likely to hike interest rates at a normal pace for a little while longer.
This bolstered market hopes about the chances of an interest rate hike being made in December, potentially followed by more early next year.
On top of this, US President Donald Trump’s plans for tax reform briefly boosted US Dollar demand on Wednesday.
However, as many analysts have pointed out the lack of details in the US government’s tax plans, the US Dollar has slipped back from its highs since yesterday.
Euro Dollar Exchange Rate Forecast: Jobs Data Due Next Week
Could the US Dollar continue to recover against the Euro in the coming week? That’s likely to depend on German political developments and upcoming US ecostats.
If German Chancellor Angela Merkel makes progress on coalition negotiations, the Euro is likely to see slightly stronger performance.
On the other hand, if concerns worsen about the potential of Merkel losing influence in the Eurozone, the shared currency could weaken further.
Euro investors are also likely to pay attention to Monday’s Eurozone unemployment data and Wednesday’s final September Markit PMIs for the bloc.
Perhaps the biggest upcoming ecostats for Euro Dollar investors will be next Friday’s US Non-Farm Payroll results. US jobs data is typically influential, but after the recent focus put on the job market by Fed officials the data could impact the US Dollar outlook.
Other upcoming US data includes September’s US PMIs and August’s US trade balance results, which could also influence Euro Dollar exchange rate movement.
EUR USD Interbank Rate
At the time of writing this article, the Euro Dollar exchange rate trended in the region of 1.1800. The US Dollar to Euro exchange rate traded at around 0.8472.