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Euro Fluctuates against US Dollar as Traders Bearish Before Big Data

The Euro gained some ground against the US Dollar today, but the pairing continues to trade within a fairly limited band.

Key movers are recent hawkish remarks from the New York Federal Reserve President William Dudley and an optimistic statement from the German BDI Federation of Industry.

Dudley commented that US wage growth and inflation were likely to rebound in the medium term, indicating a likelihood that interest rates could again be raised in 2017. With a lack of significant data until today’s US Oil Inventories and Home Sales releases, this is news that still very much dominates US Dollar headlines and continues to propel the currency.

There were no significant Eurozone releases today to move the Euro, however BDI President Dieter Kempf quite optimistically said that Germany’s economic output could increase by some 1.5% this year. He did however issue a warning, saying:

‘The robust economic situation is not a signal to sit back and rest on one’s laurels. Our success is also a result of the weak Euro, the moderate price of oil and the expansive monetary policy of the European Central Bank. Those are all factors over which we have very limited control.’

The Dutch Consumer Confidence figures remained steady for June, it was revealed this morning, whilst spending growth for April accelerated – information that suggests consumer confidence is growing, as the willingness to buy continues to improve. The Euro did not respond significantly to this information, however.

Many were keen to hear what Boston Federal Reserve Bank President Eric Rosengren had to say Tuesday, but he neglected to comment on current economic conditions or indeed monetary policy for the US. The president of the Federal Reserve in Dallas, Robert Kaplan, however demonstrated a somewhat dovish outlook for short-term interest rate hikes, saying, ‘We should be very careful about raising rates and we should do it patiently and carefully.’ Kaplan added that he would like to see improvements to inflation first of all.

In regards to near-term

Last week ended somewhat badly for the US, with construction and consumer confidence reports coming in lower than forecast, building permits dropping to 1.17 million, some weak Housing Starts data and the University of Michigan Consumer Sentiment index also dropped to 94.7 for May – a new 7-month low.

The American Petroleum Institute however revealed yesterday that US crude oil in inventory had actually dropped -2.7 million barrels; a more severe drop than the -2.1 million forecast. If this is echoed in today’s release of figures then the US Dollar may see a brief boost, as it would boost crude oil prices on the prospect of increased demand, which would benefit US oil producers.

Friday will see a significant amount of data releases for both countries, including US Home Sales and Manufacturing PMIs for both the US and the EU. With the US forecast to see an uptick in growth in these areas, whilst the EU is expected to see a slowdown in expansion, the US Dollar may be due to gain some ground.

Current Interbank EUR USD Exchange Rates

At the time of writing, the Euro to US Dollar (EUR USD) exchange rate is trading at 1.1141 and the US Dollar to Euro (USD EUR) exchange rate is trading at 0.8973.