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Euro US Dollar (EUR/USD) Exchange Rate Sinks as German Consumer Sentiment Suffers

EUR/USD Exchange Rate Falls as German Economy Loses Momentum

The Euro US Dollar (EUR/USD) exchange rate fell today following the publication of September’s German GfK consumer confidence survey, which fell below forecasts from -0.4 to -1.2. The pairing is currently trading around $1.17.

Rolf Bürkl, a GfK consumer expert, commented on the latest data:

‘Significant higher incidence values, a slowdown in vaccination momentum, and discussions about how to deal with unvaccinated individuals in the future have caused noticeable uncertainty among consumers in Germany. They fear that restrictions could even be tightened again. This is obviously depressing consumer sentiment right now.’

Fading German consumer confidence has weighed on the Euro to US Dollar exchange rate, with many EUR traders concerned about the outlook for the Eurozone’s largest economy.

The latest German IFO business climate index also fell below expectations in August, raising concerns about the nation’s economic momentum.

This week also saw dovish comments from European Central Bank (ECB) chief economist, Philip Lane, who said it might be ‘too early’ for the bank to end its pandemic-era stimulus measures next month.

As a result, the single currency has suffered from fading optimism in the Eurozone economy.

US Dollar (USD) Exchange Rate Edges Higher as Safe-Haven Demand Increases

The US Dollar (USD) edged higher against the single currency today following the publication of the US durable goods orders data, which posted above expectations and improved US market mood.

While goods orders contracted by 0.1% in July, this beat forecasts of a more substantial slump of 0.3%, providing a glimmer of hope for the world’s largest economy.

John McCormick, writing for The Wall Street Journal, said:

‘Orders for cars, appliances and other durable goods decreased slightly in July, as manufacturers continued to grapple with shortages in parts and labor and confront higher material costs.

‘New orders for products meant to last at least three years decreased 0.1% to a seasonally adjusted $257.2 billion in July as compared with June, the Commerce Department said Wednesday. Economists surveyed by The Wall Street Journal had estimated a 0.5% decline.’

In US economic news, today saw the release of the latest gross domestic product data for the second quarter, which rose by 6.2%.

The Macro Markets Daily Newsletter commented:

‘US GDP growth confirmed at 6.6% annualized in Q2 – there’s a huge range of private-sector forecasts for Q3, but the Atlanta Fed tracker suggests growth will be weaker than the consensus forecast.’

With the outlook for the US economy improving, however, demand for the safe-haven ‘Greenback’ has risen on global Covid-19 uncertainty.

EUR/USD Exchange Rate Forecast: US Fed Speech in Focus

US Dollar (USD) traders will be looking ahead to tomorrow’s speech from the Federal Reserve’s Chair, Jerome Powell.

Any dovish comments about the state of the US economy would be USD-negative.

However, if global risk sentiment continues to deteriorate, with rising Covid-19 cases in key economies such as the Eurozone or China, then demand for the safe-haven ‘Greenback’ would head higher.

Euro (EUR) traders will continue to eye Europe’s Covid-19 developments. If daily cases continue to rise in large economies like Germany and France, then the single currency would suffer.