Improved US Labour Market Conditions Boost the ‘Buck’ (USD) as Fed Hike Bets Continue
While US Consumer Credit fell by less than had been forecast yesterday the domestic Labour Market Conditions Index unexpectedly rose from 1.8 to 2.1. Adding further positive fuel to bets of a sooner Fed rate hike this has seen the EUR/USD pairing shed value to downtrend this morning at 1.1179.
Today’s second quarter Eurozone GDP grew by a greater degree than investors had anticipated, to the benefit of the EUR/USD exchange rate.
Dovishness of ECB Saw the Common Currency (EUR) Slip as US Employment Data Proved Mixed
After a relatively strong run by the single currency (EUR) for much of last week the EUR/USD pairing was brought rapidly down by comments on Thursday from European Central Bank (ECB) President Mario Draghi. Emphasising the probability of further quantitative easing measures being introduced in the Eurozone in the near future as a response to the global slowdown and economic contractions in China, Draghi reinforced a commitment to keeping the Euro competitive. Thus, in spite of the ECB leaving interest rates on hold, many investors were inclined to move away from the low-yielding currency in favour of more profitable rivals. In response the EUR/USD conversion rate slumped to a weekly-low of 1.1092.
Although the Euro began to regain some ground on Friday despite weaker PMI results from the Eurozone the EUR/USD exchange rate was hampered by another substantial wave of Fed interest rate hike speculation. While the US Change in Non-Farm Payrolls showed the creation of a smaller number of jobs than had been forecast the domestic Unemployment Rate sunk to its lowest level since 2008. This mixed bag made it difficult for traders to predict the direction in which the Federal Open Market Committee (FOMC) will lean in its meeting later this month, but as chances remain for an imminent take-off the ‘Greenback’ (USD) was somewhat buoyed.
Eurozone GDP Rises Despite Lowered Investor Confidence, EUR/USD Pairing Benefits from Renewed Euro Rally
Increasing the appeal of the Euro further, yesterday’s year-on-year German Industrial Production figure for July demonstrated a smaller decline than expected to fall to 0.5% rather than 0.3%. This showed that the impact of the Chinese slowdown on the primary economy of the Eurozone has been less severe than might have previously been thought. However, the Eurozone Sentix Investor Confidence index for September undid some of this reassurance as it slumped further than expected to clock in at 13.6 instead of the forecast 16. Consequently movement for the EUR/USD conversion rate was ultimately rather limited throughout the rest of the day, the single currency too weakened to retake ground.
After improved German Imports and Exports but a lower-than-forecast national Trade Balance the EUR/USD pairing has been experiencing a relatively limited uptrend as the ‘Greenback’ remains dovish ahead of this afternoon’s fresh domestic data. The awaited Eurozone GDP, however, printed this morning at a higher level than expected at 1.5%, a notable increase upon the previous quarter’s result of 1%. Shoring up confidence in the robustness of the currency bloc, this prompted the EUR/USD exchange rate to continue climbing.
EUR/USD Exchange Rate Forecast: Fed Hike Bets Likely to Drive Pairing Movement
Friday will see the release of German Consumer Price Index data and the rate of inflation in the Eurozone’s largest economy could possibly spur the ECB at their next meeting. Without strong numbers here the Euro is likely to return to a downtrend against rivals, unable to capitalise on any weakness that might occur for the ‘Greenback’.
Speculation with regards to the Fed’s next move is set to remain a strong influence on the EUR/USD pairing, particularly as traders look to the week’s upcoming economic data for suggestion as to the current sentiment of the FOMC.
Current EUR, USD Exchange Rates
At time of writing the Euro to US Dollar (EUR/USD) exchange rate is trending in the range of 1.1174, with the US Dollar to Euro (USD/EUR) pairing down at 0.6504.