Euro Exchange Rate News

Euro US Dollar (EUR/USD) Retreats from Monthly High amid Shifting Rate Cut Bets

Euro (EUR) and US Dollar bills

Euro US Dollar (EUR/USD) Subdued amid Rate Cut Speculations

The Euro US Dollar (EUR/USD) exchange rate is rangebound this morning ahead of market moving US releases this afternoon, despite upbeat news for German industry.

At the time of writing the EUR/USD exchange rate is trading at $1.0931, virtually unchanged from this morning’s opening rate.

Euro (EUR) Mixed following Upbeat German Releases 

The Euro (EUR) is trading without a clear direction against most of its major peers today despite better-than-forecast German industrial data.

German industrial production increased by 1% in January, beating expectations of a 0.6% rise. The unexpected increase appeared to initially boost EUR sentiment this morning, underpinning recent German economic optimism found following this week’s weighty surge in German exports.

The data suggested that conditions in the Eurozone’s largest economy are on the up, indicating that last year’s manufacturing recession may have bottomed out amid increased activity.

Carsten Brzeski, economist at ING, commented:

‘What we take from the first batch of hard data for the German economy in 2024 is the picture of an economy that is bottoming out but still stuck between cyclical and structural weakness.’

However, in the wake of yesterday’s European Central Bank’s (ECB) widely anticipated hold on interest rates yesterday, the common currency’s upside potential appears limited, with policymakers indicating that rate cuts are around the corner.

Widespread market speculations of monetary loosening in the summer months continue to pressure the Euro today, leading to mixed trading conditions.

US Dollar (USD) Muted ahead of Jobs Data

The US Dollar (USD) is volatile today ahead of high-impact data releases due out this afternoon.

Non farm payrolls, due out later today, are expected to show a significant slump in jobs added by the US economy, retreating from the previous month’s notable increase. Renewed signs of a cooling labour market could see USD plummet, reviving concerns of weak American employment.

In the meantime, investors appear reluctant to place any aggressive bets on the ‘Greenback’.

In addition to this, a dovish pivot from Federal Reserve Chair Jerome Powell this week continues to stymie USD exchange rates. Rising expectations that the Fed could begin cutting interest rates in June may leave the US Dollar rudderless ahead of this afternoon’s figures.

Richard Hunter, Head of Markets at interactive investor, noted:

‘The Fed stands prepared to reduce interest rates this year when circumstances dictate, and implied that such a move is not far away, even though there is no immediate rush to ease monetary policy in light of consistently favourable economic data.’

Euro US Dollar Exchange Rate Forecast: US Labour Data to Sink the ‘Greenback’?

Looking ahead, the US non farm payrolls are in focus this afternoon. A forecast slump will likely see USD struggle against its major peers.

Otherwise, the next notable American data release arrives on Tuesday, with the latest batch of US inflation data due to report a cooling of core inflation. However, with headline inflation set to hold at 3.1%, USD could strengthen amid waning rate cut speculations.

For the Euro, the next key release also comes early next week. German inflation is set to report a slight warming in February’s data, which could see ECB rate cut bets deferred, lending the common currency some support.

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