Euro US Dollar (EUR/USD) Exchange Rate Undermined by German Recession Fears
The Euro US Dollar (EUR/USD) exchange rate is treading water this morning, following confirmation of contraction in Germany’s Q3 GDP data.
At the time of writing, EUR/USD is trading at around US$1.0909, showing little movement from the morning’s opening rates.
Euro (EUR) Pressured by German Recession Anxieties
The Euro (EUR) is under pressure this morning, following confirmation of a contraction in German GDP.
In the third quarter, Germany’s economy contracted by 0.1% compared to the previous three months. This places the Eurozone’s largest economy teetering on recession, and is sparking anxiety amongst EUR investors.
Furthermore, the annual reading was revised lower from -0.3% to -0.4%, reflecting further deterioration.
Carsten Brzeski, Global Head of Macro at ING, commented:
‘This weak growth performance has a long list of explanations: there is the cyclical headwind stemming from inflation, still elevated energy prices and energy uncertainty, higher interest rates and China’s changing role from being a flourishing export destination to being a rival that needs fewer German products. But there are also well-known structural challenges, ranging from demographics to energy transition and not enough investment.’
Additionally, Germany’s Ifo business climate indicator for November came in below forecasts. However, the detrimental effect this may have on EUR could be limited, as it still reflected an improvement and a four-month high.
US Dollar (USD) Rudderless amid Quiet Day of Trade
This morning, the US Dollar (USD) is trading without clear direction, amid a lack of impactful data releases.
As such, investors are instead turning their attention to this afternoon’s US flash PMIs. In November, the US manufacturing sector is forecast by economists to have fallen into contraction territory, with a reading of 49.8 anticipated.
If this prints in line with forecasts, it may weaken USD as we move through the session by sparking concerns about the American economy. Additionally, economists forecast a slowdown in the service sector, but for it to remain in growth.
Elsewhere, a quiet day of trade is likely for the ‘Greenback’. Markets are enjoying a half-day after yesterday’s Thanksgiving closures.
Euro US Dollar Exchange Rate Forecast: Decreasing German Consumer Pessimism to Lift EUR?
Looking ahead for the Euro, the core catalyst of movement is likely to be the latest German GfK consumer confidence index.
Due to print on Tuesday, consumer pessimism is forecast to have decreased for December, which could bring cheer to EUR investors. The Eurozone’s largest economy could continue to stage a recovery for its outlook, which would lift EUR.
However, as the index is forecast to remain firmly in downbeat territory at -26, any gains could be limited.
For the US Dollar, the data calendar looks set to remain sparse at the beginning of next week’s session.
Because of this, the ‘Greenback’ may struggle to find a clear direction, especially if the market mood remains upbeat.
However, if trading conditions deteriorate, the safe-haven US Dollar could gain ground against its peers.