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Euro to US Dollar Exchange Rate Forecast: EUR/USD Weakens on German, US Manufacturing Data

Disappointing US Manufacturing PMI Fails to Dent US Dollar (USD) Demand

Although the latest US Manufacturing PMI failed to rise as far as investors had hoped the US Dollar (USD) has remained on bullish form against rivals. On Wednesday morning the Euro to US Dollar (EUR/USD) exchange rate is trending lower in the region of 1.1194.


Confidence in the Euro (EUR) is muted on Tuesday morning, with a disappointing German Manufacturing PMI helping to push the Euro to US Dollar (EUR/USD) exchange rate lower.

Hawkish Fed Comments Shored up US Dollar (USD) Exchange Rate as Odds of ECB Easing Declined

Following the sharp dip seen in the wake of last week’s Federal Open Market Committee (FOMC) policy meeting the US Dollar (USD) returned to stronger form on Monday. With markets struggling to maintain their more optimistic outlook, the ‘Greenback’ benefitted from increased safe-haven demand. The US Dollar was equally bolstered by relatively hawkish comments from Fed policymakers Jeffrey Lacker and Dennis Lockhart, who both expressed the belief that inflation in the US was likely to accelerate. As this seemed to suggest a greater willingness to raise interest rates in the near future the USD exchange rate climbed higher in response.

Members of the European Central Bank (ECB) board, on the other hand, seem slightly more divided as Bundesbank President Jens Weidmann called for the central bank to hold off on further monetary loosening. Weidmann particularly refuted an earlier suggestion from Peter Praet that interest rates could go lower and helicopter money could even be implemented, reducing hopes that the central bank might be out of ammo. As a result the Euro (EUR) weakened against a number of the majors, trending lower in the absence of any more supportive economic data.

Weaker German Manufacturing PMI Dents Euro to US Dollar (EUR/USD) Exchange Rate Today

Despite a stronger-than-expected German IFO Business Sentiment Survey the single currency has remained on a weaker footing today. While business confidence improved markedly on the month in March this was contrasted by a more disappointing German Manufacturing PMI, which failed to advance as investors had expected. Although the manufacturing sector remains in growth territory the pace of expansion nevertheless slowed, suggesting that the Eurozone’s powerhouse economy is not in such a robust state.

Terror attacks in Brussels this morning have also led to an increase in safe-haven demand, shoring up the US Dollar further as traders seek out lower-risk assets.

EUR/USD Exchange Rate Forecast: Stronger US Manufacturing PMI to Increase US Dollar Appeal

If this afternoon’s US Manufacturing PMI demonstrates continued growth the EUR/USD exchange rate is expected to trend lower. Stronger domestic data would certainly increase the case for the Fed to consider raising interest rates sooner rather than later, a prospect which would boost the appeal of the ‘Greenback’.

German and Eurozone Consumer Confidence figures could shore up the Euro later in the week, providing sentiment shows signs of picking up in spite of negative global headwinds. Should confidence falter, however, the single currency is likely to fall further out of favour with markets.

Current EUR, USD Exchange Rate Forecast

At the time of writing, the Euro to US Dollar (EUR/USD) exchange rate was slumped around 1.1204, while the US Dollar to Euro (USD/EUR) pairing was making gains in the region of 0.8922.