Rising US Unemployment Pushes Down the ‘Buck’ (USD) as EUR/USD Conversion Rate Hits Monthly-High
Although the repayment deadline for the European Central Bank (ECB) was successfully met yesterday Greece remains in the spotlight as Prime Minister Alexis Tsipras has officially stepped down, triggering fresh September elections. However, the possibility for Tsipras to return to power with a stronger, more cooperative majority and thus smooth the path of austerity measures has meant that this new uncertainty has failed to dent the common currency (EUR) this morning.
An increase in Initial Jobless Claims and a fall on the Leading Indicators for the US yesterday helped send the ‘Greenback’ (USD) into a downtrend against most of the majors. Consequently the EUR/USD exchange rate is currently moving positively at 1.1253.
A less than hawkish set of Federal Open Market Committee (FOMC) meeting minutes have failed to particularly impact the EUR/USD pairing today, with the Greek repayment to the European Central Bank (ECB) improving sentiment towards the single currency (EUR).
Investors Remained Cautious this Week despite Steady Progress on Greek Deal, EUR/USD Conversion Rate Entered Downtrend
The rush to approve the third Greek bailout was the primary focus of attention for the Euro (EUR) this week, as various European parliaments were called to vote on the proposal ahead of Thursday’s looming European Central Bank (ECB) repayment deadline. Monday saw Latvia and Lithuania come out in favour, with Spain, Austria and Estonia following suit on Tuesday in spite of voiced reservations about the plan from a number of MPs. With the chances of a default decreasing investors nevertheless continued to exercise caution and the EUR/USD exchange rate slipped steadily downwards.
Fortunes for the ‘Greenback’ (USD) were also relatively muted though, with the majority of the early week’s data ultimately yielding disappointment. Tuesday’s US Building Permits and Housing Starts were both down by more than expected, suggesting that the domestic construction sector is slowing down at a greater rate than initially assumed. With Wall Street falling on the back of more turmoil in the Chinese stock markets the ‘Buck’ was not looking to be in a particularly strong position ahead of yesterday’s Consumer Price Index and Federal Open Market Committee (FOMC) meeting minutes.
Federal Open Market Committee (FOMC) Sentiment Led to Dovish Trading for US Dollar (USD) Today
Although it had been viewed as the most significant obstacle to a timely approval of the Greek bailout, the Bundestag yesterday voted in favour of the proposal. Chancellor Angela Merkel even faced less of a rebellion from party members than had been anticipated, passing the bailout comfortably. With the European Stability Mechanism (ESM) swiftly moving to sign off and release the first tranche of funds to the Hellenic nation today’s ECB repayment was ultimately met.
After an as-expected result for the US Consumer Price Index the majority of attention shifted to the evening’s FOMC minutes for July, trader bets on a September rate rise hitting fever pitch. However the tone of comments when released turned out to lean towards a more dovish sentiment, with a strong emphasis on a need to see evidence of rising inflation rates before the Fed could commit to a hike. While optimism remains for lift-off to occur by the end of the year the impact of the global slowdown continues to hold a question mark over the decision.
EUR/USD Exchange Rate Forecast: ‘Greenback’ May Pick up on Upcoming Unemployment Data
More data from the US this afternoon could stimulate the beginnings of a rally for the US Dollar, with unemployment figures, Existing Home Sales and Leading Indicators all due out. While the chances are that the housing stats will remain less than encouraging, a pick-up could be in store with good showings elsewhere. Evidence of the domestic economy bucking the global trend may well spur a more substantial return to form for the ‘Greenback’.
With the Greek situation receding slightly from the spotlight, although speculation over the possibility of early elections will likely continue to have some effect, the single currency will be waiting for movement on tomorrow’s Consumer Confidence Survey results for Germany and the Eurozone. Any further positivity from the Eurozone would undoubtedly keep the EUR/GBP pairing on an uptrend.
Current EUR, USD Exchange Rates
At time of writing the Euro to US Dollar (EUR/USD) exchange rate is trending narrowly at 1.1129, with the US Dollar to Euro (USD/EUR) pairing in the region of 0.8980.