The Euro to US Dollar has risen slightly on the afternoon of 15th February, following news of a Eurozone trade surplus expansion.
The seasonally adjusted figure grew from €22bn in November to €23.8bn in December, although the overall trade reading showed a surplus reduction.
Economists speculated that the Euro’s strength could cause further trade surplus reductions, so the EUR/USD exchange rate may fall back in the coming months.
(First published 14th February, 2018)
Slowing Eurozone GDP Growth Keeps EUR/USD Exchange Rate Tight
The Euro has traded in a narrow range against the US Dollar (EUR/USD) today, due to a lacklustre response to the latest Eurozone GDP data.
On the plus side, there have been estimates for rising year-on-year German GDP growth in Q4 2018.
Less positively, however, second estimates for the overall Eurozone have brought downward revisions for the quarter-on-quarter and year-on-year readings.
Optimism about Future Eurozone GDP Growth Prevents EUR/USD Exchange Rate Crash
While the Euro hasn’t rallied against the US Dollar today, it also hasn’t crashed in the currency pairing.
This is partly down to longer-term forecasts for the Eurozone economy, such as one provided by ING Bank Senior Eurozone Economist Bert Colijn.
Mr Colijn has put the GDP data into context, stating;
‘Growth in the Eurozone economy was broad-based. This rounds out a year in which the Eurozone economy was helped by strong tailwinds and the question is how long these growth rates can be maintained.
Even though the ECB has reduced asset purchases, the Euro has appreciated against the [US] Dollar and politics remains a factor of uncertainty, leading indicators are still pointing to a very strong start to the year’.
US Dollar Devalued by Warning of Global Economic Damage from Trade Sanctions
The US Dollar has traded in a narrow range against the Euro on 14th February, owing to concerns about the effects of US trade policy on the global economy.
In response to US threats to impose punitive tariffs on China, Chinese officials have warned that this could have a negative knock-on effect for the world.
In particular, Chinese Foreign Ministry Spokesman Geng Shuang has cautioned that;
‘Any sign of unilateralism or protectionism will worsen global trade issues and will hurt the recovering momentum of the world economy.
China always regards the US as an important cooperation partner in trade and economy, and we hope we will continue to open our respective markets wider’.
The feared ‘trade war’ has not yet erupted between the US and China this year, but Shuang’s remarks have only increased trader concerns and devalued USD in the process.
Euro to US Dollar Exchange Rate Forecast: EUR/USD could Rise on Eurozone Trade Stats
The Euro has a chance of rallying against the US Dollar on 15th February, when the Eurozone trade balance for December will be announced.
November’s 26.3bn trade surplus reading is predicted to rise to 30.2bn in December, which could greatly increase demand for the Euro.
The Eurozone has long maintained a sizable trade surplus, so a shoring up of the figure could raise Euro trader confidence.
Ahead of Thursday’s high-impact data, the US Dollar could be affected by inflation and retail sales data out this afternoon.
Respectively, slowing inflation and retail sales activity is predicted, which may lead to a US Dollar decline.
Lower inflation will reduce the pressure on the Federal Reserve to consider raising interest rates, while slowing retail sales might mean falling US GDP.