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Soft US Data Delays US Rate Hike Bets, EUR/USD Exchange Rate Forecast to Edge Higher despite Cooler-than-Expected German Factory Orders

UPDATE

The Euro to US Dollar (EUR/USD) exchange rate ticked higher by around 0.2% on Tuesday morning.

With futures traders delaying bets regarding the timing of a Federal Reserve benchmark interest rate following disappointing Non-Manufacturing data, the US Dollar continues to hold a weak position versus its currency rivals. With poor labour-market conditions likely to have a negative impact on policymakers, many fear that the Fed will postpone a rate rise until 2016. Later today, US Trade Balance data may provoke ‘Greenback’ (USD) changes.

Although European economic data produced a mixed-bag of results thus far on Tuesday morning, the shared currency edged higher versus its major rivals. The appreciation can be attributed to negative correlation with the US Dollar. However, the Euro appreciation doesn’t mask some poor data results of late, with German Factory Orders coming in at 1.9% on the year in August; well below the 5.6% growth in orders forecast. A faster pace of German construction in September somewhat counteracted the dismal factory orders print.

The Euro to US Dollar (EUR/USD) exchange rate is currently trending in the region of 1.1216.

Yesterday…

Euro Climb on Negative EUR/USD Correlation Short-Lived

The Euro to US Dollar (EUR/USD) exchange rate was trending within a limited range on Monday afternoon.

Despite mostly poor results from Euro-area Services and Composite PMIs, the shared currency advanced versus most of its major peers. The appreciation is mainly the result of negative EUR/USD correlation which has seen the single currency surge in response to the US Dollar downtrend. Even ongoing concerns that the European Central Bank (ECB) will be forced to expand quantitative easing in order to combat deflation haven’t been enough to offset Euro gains.

However, Euro gains were short-lived given that European economic data produced mostly disappointing results today. Spanish, Italian, German and Eurozone Services and Composite PMIs failed to meet with median market projections. However, French Services and Composite PMIs bettered estimates, as did the Spanish Consumer Confidence report. Commenting on the Eurozone Composite report, chief Markit economist Chris Williamson said; ‘The final PMI reading came in slightly below the earlier flash estimate but still leaves a signal of the Eurozone economy having expanded 0.4% in the third quarter. However, the failure of the economy to pick up speed over the summer will be a disappointment to the ECB, especially with job creation sliding to an eight-month low.’

The Euro to US Dollar (EUR/USD) exchange rate is currently trending in the region of 1.1200.

US Dollar Continues to Weaken as Traders Digest Hugely Disappointing Non-Farm Payrolls Report

On Friday, US labour market data shocked investors after Non-Farm Payrolls came in well below expectations. This had the knock-on effect of causing futures traders to delay bets as to the timing of a Federal Reserve rate hike. The results of the report were so unexpected that traders are struggling to find any silver lining. ‘When you look through all the details of the data, there just isn’t anything good to hang your hat on,’ said New York based economist Thomas Simons. ‘It’s been years since we’ve seen such an unambiguously bad report.’

September’s US Non-Manufacturing Composite report disappointed pundits having failed to meet with expectations. In addition, September’s Labour Market Conditions Change failed to reach the median market projection. This saw continued damp demand for the US asset on Monday.

The Euro to US Dollar (EUR/USD) exchange rate dropped to a low of 1.1193 during the early stages of Monday’s European session.

Euro to US Dollar (EUR/USD) Exchange Rate Forecast to Hold Steady after Domestic Data Disappoints 

With a complete absence of further domestic data to provoke changes, the Euro to US Dollar (EUR/USD) exchange rate is likely to hold steady for the remainder of Monday’s European session.

Tuesday’s economic docket will be of interest to those invested in the Euro to US Dollar (EUR/USD) exchange rate. German Factory Orders, German Construction PMI, German Retail PMI and the Eurozone Retail PMI will all have the potential to provoke Euro volatility. In terms of US data, August’s Trade Balance and a speech by Federal Reserve policymaker John Williams will be of interest.

The Euro to US Dollar (EUR/USD) exchange rate climbed to a high of 1.1290 during Monday’s European session.