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Euro US Dollar (EUR/USD) Wavers near Monthly High following  

Euro US Dollar (EUR/USD) Subdued as German Exports Rise

The Euro US Dollar (EUR/USD) exchange rate is struggling to push higher this morning amid cheery trade; however, it appears to be holding onto the gains made this month.  

At the time of writing the EUR/USD exchange rate is trading at $1.0875, virtually unchanged from this morning’s opening rate.

Euro (EUR) Mixed following Upbeat German Releases 

The Euro (EUR) is trading without a clear direction this morning despite positive economic news in the Eurozone.

Germany’s trade surplus widened in January, with exports unexpectedly increasing by 6.3% as demand from both China and the Euro area rose. Rebounding trade at the start of the year initially served to underpin an improving German economic sentiment for the export-heavy economy as the session opened.

Thomas Gitzel, Chief Economist at VP Bank Group observed:

‘It is a good start to the year for exports. However, after the significant setback in December, a positive figure in January was very likely.’

Following the upbeat trade data, retail sales in the Eurozone were reported to have increased by 0.1% as forecast in January’s month-on-month figure. Further indicating that a recovery in consumer spending was a smaller-than-expected contraction in January’s annualised retail activity, which fell by 1%, rather than hitting expectations of a 1.3% slump.

Signs of increased economic activity in the Eurozone may serve to quieten market speculations of any hasty monetary loosening from the European Central Bank (ECB) in the coming months, ahead of tomorrow’s highly impactful interest rate decision.

US Dollar (USD) Wavers ahead of Fed Testimony

The US Dollar (USD) is fluctuating near a monthly low this morning ahead of impactful releases due later today.

A data-light start to the session sees USD investors recall yesterday’s smaller-than-forecast expansion in the ISM services PMI, which initially rattled markets by signalling that economic activity is moving at a slower pace than previously imagined.

With this in mind, markets appear reluctant to place any aggressive bets on the ‘Greenback’ ahead of key commentary from Federal Reserve Chair Jerome Powell this afternoon. Powell is due to address congress, providing a testimony regarding the Fed’s upcoming monetary policy changes.

Pressure to provide more details about when interest rate changes may occur in 2024 could see USD slump.

Economists at Commerzbank commented:

‘Expectations are now very high not only for the US economy but also for the Fed. This does not mean that expectations will be disappointed again today. But it does mean that the risks to the USD will remain asymmetrical for the time being.’

Elsewhere, an increasing appetite for risk is limiting the safe-haven US Dollar’s upside potential,

Euro US Dollar Exchange Rate Forecast: Fed Testimony in Focus

Looking ahead, Powell’s commentary this afternoon could rock global markets later today if he indicates that the central bank is moving closer to monetary loosening in the coming months.

While this is likely to be the core catalyst of USD movement, the latest labour data is likely to imbue ‘Greenback’ exchange rates with additional volatility. Economists expect the latest JOLTs job openings report to show a decline in new job opportunities in January, retreating from the previous month’s weighty surge.

However, a forecast increase to 150,000 new private sector hires in February’s ADP employment change report could serve to create a muddied picture of the US labour market, leaving the ‘Greenback’ to endure volatile trade.

Looking to the Eurozone, the ECB is due to deliver its late interest rate decision alongside an accompanying press conference tomorrow afternoon. While rates are widely expected to remain unchanged this month, any forward guidance may influence the trajectory EUR exchange rates.