Euro to US Dollar Exchange Rate Kept Near Worst Levels on Economic Divergence
Signs that the Eurozone economy has slowed more than expected, combined with the strong US economic outlook, have made it difficult for the Euro to US Dollar (EUR/USD) exchange rate to recover from near multi-month-lows.
While its losses have been muted compared to last week’s tumble from 1.1456 to 1.1320, EUR/USD has still tumbled this week and is currently trending not far above its worst levels since last year.
EUR/USD slipped to a three-month-low of 1.1252 yesterday. While the pair has rebounded slightly from those worst levels it has only recovered to around 1.1271 at the time of writing.
According to the latest German growth projections, the nation barely avoided a recession at the end of 2018 – but the stats still fell short of analyst forecasts and left the Euro (EUR) unappealing.
Euro (EUR) Exchange Rates Weighed by Eurozone Economic Fears
The Euro was unable to sustain a notable recovery today, even versus a relatively weak US Dollar (USD). This was because much of the Eurozone’s latest data fell short of economist expectations.
Thursday saw the publication of German and Eurozone Gross Domestic Product (GDP) growth projections from Q4 2018. The Eurozone growth projections met forecasts and had little notable impact on the Euro.
The most notable aspect of the reports was Germany’s growth projections, which fell short of expectations in both major prints.
The yearly growth rate was expected to slow from 1.1% to 0.9%, but instead fell to just 0.6%.
Notably though, while monthly growth missed the expected rise to 0.1%, it did indeed rise from -0.2% to 0.0%.
As Germany missed two consecutive quarters of contraction, this meant the nation had avoided recession. While this was a relief to some investors though, the data falling short of expectations meant investors still had little reason to buy the Euro today.
US Dollar (USD) Exchange Rates Hold Ground despite Risk-On Movement
The US Dollar has avoided losses versus a weak Euro today, as despite rising market demand for riskier trade-correlated currencies amid perceived developments in US-China trade negotiations, the strong US economic outlook is helping it to hold its ground.
Recent US data continues to indicate that despite slowing global growth, the US economy is performing strongly. This contrasts with the Eurozone economy, which is slowing due to surprisingly poor performance in major nations like Germany.
Demand for the US Dollar has been limited by hopes that the US and China can reach some kind of resolution in trade talks, rather than escalating tensions.
This is making investors less eager to hold onto safe haven currencies like the US Dollar in favour of riskier assets.
Wednesday’s US inflation data was mixed, coming in short of forecasts month-on-month but higher year-on-year. Essentially this had little impact on the US Dollar.
Euro to US Dollar (EUR/USD) Exchange Rate Investors Await Trade Data and Developments
The Euro to US Dollar exchange rate is on track to end the week lower, due to German growth fears and expectations for solid US growth.
Unless there is a late-week development that makes the Euro more appealing or causes a US Dollar slump, EUR/USD is unlikely to recover its losses.
Friday’s session will see the publication of the Eurozone’s December trade balance results. If the data impresses it could offer the Euro some support, but a large rebound is unlikely.
US import and export prices from January, as well as manufacturing and industrial production, and Michigan consumer confidence data, will be published during Friday’s American session.
A surge in US-China optimism could lead to fresh risk-on movement that could leave the US Dollar weaker.
Overall though, the Euro to US Dollar (EUR/USD) exchange rate outlook is unlikely to change much until next week’s key German confidence and inflation data is published.