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Euro US Dollar (EUR/USD) Exchange Rate Muted by Muddled German Releases

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Euro US Dollar (EUR/USD) Exchange Rate Rangebound amid Mixed German Data

The Euro US Dollar (EUR/USD) exchange rate is trading in narrow boundaries today, following mixed German economic data.

At the time of writing, EUR/USD is trading at around US$1.0834, showing little movement from the morning’s rates.

Euro (EUR) Listless amid Mixed German Data

The Euro (EUR) is remaining largely rangebound so far today, following a mixed slate of German economic data.

The latest batch of employment data paints a mixed picture of the German labour market. While the unemployment rate in Germany did tick upward, analysis of the figures revealed that the number of workers had increased.

Destatis released a press report which stated:

‘According to provisional calculations of the Federal Statistical Office, the seasonally adjusted number of persons in employment rose by 57,000 (+0.1%) on the previous month. Following increases of 27,000 in November 2023 and 28,000 in December 2023, the positive employment trend therefore continued at the start of the year.’

However, this was offset by an unexpected fall in German retail sales data. In January, sales decreased by 0.4%, whereas markets had forecast an improvement of 0.5%.

With consumer spending dwindling in the Eurozone’s largest economy, the common currency is left adrift.

US Dollar (USD) Muted Ahead of Core Inflation Data

So far today, the US Dollar (USD) is trading in a limited capacity as investors await the latest core PCE price index release.

As the Federal Reserve’s preferred gauge of inflation, expectations of a slight cooldown in the yearly rate could dent USD later today.

However, other measures in the release may paint a more unclear picture, or even suggest an uptick could happen.

Francesco Pesole, FX Strategist at ING, commented:

‘Our expectations are for a 0.4% core MoM print, which in our view will endorse the recent hawkish repricing of Fed rate expectations. At the moment the Fed Funds future curve prices in 80bp of easing.’

Additionally, a mixed market mood could be keeping the ‘Greenback’ tempered during the session. With no clear preference between safe-havens and risk-sensitive assets occurring, the US Dollar is largely muted.

Euro US Dollar Exchange Rate Forecast: EU Inflation in Focus

Looking ahead for the Euro, the core catalyst of movement is likely to be the Eurozone’s inflation data for February.

Both headline and core inflation rates are forecast to have cooled, with the former slowing to 2.5% from 2.8%.

If this meets forecasts, EUR may slump as investors increase their bet on policy loosening from the European Central Bank (ECB). Furthermore, the latest unemployment data for the bloc is set for release. In January, the unemployment rate is forecast to have remained at 6.4%, which could cushion the Euro somewhat.

For the US Dollar, tomorrow brings the release of the latest ISM manufacturing PMI, reflecting February’s sector activity.

Economists forecast that activity will have improved over January’s levels, but that the sector will remain in contraction. This could induce volatility for the ‘Greenback’ as it could bring the US’ economic health into question.