Poor Eurozone Survey Data Keeps EUR/USD Exchange Rate Tight
The Euro (EUR) has traded in a narrow range against the US Dollar (USD) today, following the news that confidence about Eurozone economic strength is sliding.
The latest ZEW surveys for Germany and the overall Eurozone have declined during October, extending already-negative readings by more than forecast.
The Eurozone figure has dropped from -7.2 points to -19.4, while the more high-impact German reading has fallen from -10.6 points to -24.7.
Commenting on this unsettling data, ZEW President Achim Wambach said:
‘Expectations for the German economy are dampening above all due to the intensifying trade dispute between the USA and China.
‘The resulting negative expectations on German exports are now beginning to show in the actual development of exports.
‘A further negative influence on economic and export expectations is the danger of a ‘hard Brexit’, which is becoming ever more likely.’
US Dollar to Euro (USD/EUR) Exchange Rate Steady after Retail Sales Upset
The US Dollar (USD) has failed to make much headway against the Euro (EUR) today, with yesterday’s disappointing retail sales data limiting demand for the US currency.
Monday’s stats showed a slowing pace of sales growth for the year-on-year reading in September, with a shift from 6.5% to 4.7%.
This result was below the expected 5.2% printing and unsettled USD traders.
Considering reasons for this disappointing result, Morgan Stanley Chief US Economist Ellen Zentner said:
‘Retail sales for food services and drinking places may have been impacted by the hurricane in September, as consumer confidence remained solid during the month.’
Euro to US Dollar Exchange Rate Forecast: Are EUR/USD Gains ahead on US Industrial Weakness?
The Euro (EUR) could break away and rise sharply against the US Dollar (USD) in the near-term, when this afternoon’s US industrial production data comes out.
Covering reported sector activity in September, these readings are expected to show a slower pace of output for the annual and monthly results.
Slowing industrial output alongside a forecast-matching dip in manufacturing sector activity could cause USD/EUR exchange rate losses this afternoon.
Looking beyond today’s data, any EUR/USD exchange rate gains could extend on Wednesday morning when Eurozone inflation rate data is released.
The finalised figures for September are expected to show a faster pace of activity during the month, which could cause a sharp rise in Euro demand.
Higher inflation increases the likelihood of an eventual European Central Bank (ECB) interest rate hike, an event long-awaited by EUR traders.
Potentially levelling-out trading, Wednesday evening will see the release of Federal Open Market Committee (FOMC) minutes from their latest meeting.
The Fed’s minutes might reveal firm plans for an interest rate hike in November or December this year, which would make a total of four in 2018.
A fourth rate hike has been tentatively pencilled in by US Dollar traders, so any kind of confirmation could boost the USD/EUR exchange rate.