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Euro US Dollar (EUR/USD) Exchange Rate Crawls Ahead but Lacks Follow-Through

A US Dollar bill.

China Gives Euro (EUR) Seal of Approval – EUR Exchange Rates Bolstered

The Euro US Dollar (EUR/USD) exchange rate inched ahead on Thursday, supported by news that China has given the single currency its seal of approval, but limited somewhat by mixed sentiment in the European Central Bank (ECB) minutes.

China’s Premier Li Keqiang gave a long-term vote of confidence in the Euro today, announcing that China is a long-term investor in the single currency, and that they hope it remains strong and steady.

He stated:

‘The euro is an important choice in our foreign currency reserves, and so we are continuing to buy European debt’.

This provided a small boost, but concerns continue to reign regarding the political situation in Italy –and the latest ECB minutes.

According to the bank’s meeting minutes, Eurozone growth could slow further, and uncertainty is on the rise but the bloc’s overall expansion continues to remain solid and broad-based.

It should be stressed, however, that policymakers are currently debating whether to wind down their bond-buying purchases when they expire in September or to extend them into the next year – with the recent disappointing inflation and growth results seeming to suggest the latter.

US Dollar (USD) Exchange Rates Stumble amid Unexpected Rise in US Jobless Claims

US Dollar profit-taking continued to limit the ‘Greenback’ on Thursday, though a mixed assessment of Wednesday’s Federal Open Market Committee (FOMC) meeting minutes, and a poor US jobless claims report also contributed to its weakness.

According to the US Labour Department, new applicants for US unemployment benefits jumped by 11,000 for the week ending May 19 – hitting a seasonally adjusted 234k.

This was a lot higher than the forecast of 220k and the previous score of 223k and, despite tightening labour market conditions, still raised some eyebrows.

In regards to the minutes, US policymakers largely concluded that the ongoing strength in the US economy warranted a continuation of gradual rate rises, but they also highlighted ongoing concerns regarding trade tensions with China.

Combined, investors decided to favour the Euro today – but with the US Fed liable to raise interest rates in June, it seems unlikely that this will continue for very long.

Euro US Dollar (EUR/USD) Exchange Rate Forecast: US Durable Goods Orders on the Horizon

The Euro US Dollar (EUR/USD) exchange rate could encounter greater volatility tomorrow as investors respond to the latest US durable goods orders readings for March – a reliable gauge for the strength of the US economy.

Investors currently expect the value of orders placed over the April period to fall from 2.6% to -1.4% – but given the current strength of consumer confidence in the US, it seems logical that durable goods orders will remain on solid form.

In other news, tomorrow will feature Germany’s IFO business climate and current assessment results for May, which analysts expect to ease ever so slightly.

If this occurs then it could compound fears for the economic performance of the bloc in Q2 this year, particularly with today’s GFK German consumer confidence result easing.