EUR/USD Exchange Rate Rises despite Rising Eurozone Unemployment in July
The Euro to US Dollar (EUR/USD) exchange rate rose by 0.4% today, with the pairing currently trading around $1.198.
The Euro (EUR) rose today after the Eurozone’s inflation figure turned negative last month, increasing the chances that the European Central Bank (ECB) could inject more stimulus to generate price growth.
Pictet Wealth Management Strategist Frederik Ducrozet commented:
‘We stick with our view that the ECB will ultimately increase the Pandemic Emergency Purchase Programme envelope again, most likely by 500 billion euros in December.’
Today also saw the release of the Eurozone’s unemployment rate report for July, which rose from 7.7% to 7.9%. As a result, concerns are continuing to grow over the bloc’s unemployment crisis in the months ahead.
Bert Colijn, the senior economist for the Eurozone at ING, commented on the data:
‘As short-time work schemes are being extended at the moment, it is likely that the unemployment rate will continue to creep up at a very subdued pace for quite some time. This provides a comfortable cushion against income declines and negative second round effects on the economy but still, the direction of unemployment is up.’
Euro (EUR) investors will also be looking ahead to today’s speech from the ECB’s Philip Richard Lane, a member of the Executive Board at the central bank. Any dovishness about the Eurozone’s economy would prove EUR-negative.
US Dollar (USD) Sinks as Safe-Haven Assets Suffer as China’s Manufacturing PMI Rises
The US Dollar (USD) suffered from a sell-off of safe-haven assets today after China’s manufacturing PMI beat forecasts. This bouyed demand for risky-assets as the world’s second-largest economy improves.
Andrew Tilton, chief Asia Pacific economist at Goldman Sachs, commented:
‘[China’s] [m]anufacturing rebounded most quickly. It didn’t require as much social distancing, it wasn’t as sensitive to social distancing so activity was rebounding more quickly there, and as such is now decelerating after the initial strong rebound.’
Also weighing on the US Dollar is last week’s news that the Federal Reserve’s new policy framework would likely leave US interest rates at record lows.
Today will see the release of August’s US ISM manufacturing PMI, forecast to rise from 54.2 to 53.5. We could see the ‘Greenback’ benefit from an improving picture for the American economy in the months ahead.
EUR/USD Forecast: Could a Weak ‘Greenback’ continue to buoy the Single Currency?
Euro (EUR) investors will be looking ahead to tomorrow’s release of July’s German retail sales figure. Any marked improvement in the Eurozone’s largest economy would prove EUR-positive.
In US economic data, tomorrow will see the release of the latest ADP employment change figure for August. If America’s unemployment levels continue to remain high, then we could see the ‘Greenback’ continue to suffer.
If safe-haven demand for the US Dollar continues to slip, then we could see the single currency climb higher.