Falling Manufacturing Levels across the Eurozone Trigger EUR/USD Exchange Rate Decline
The Euro to US Dollar exchange rate (EUR/USD) has fallen today, following reports of slowing levels of manufacturing activity across the single currency bloc in February.
Figures have shown a decline in the Markit manufacturing PMI index for the Eurozone from 59.6 points to 58.6, while in Germany the reading has dipped from 61.1 points to 60.6.
In both cases, however, it is worth noting that the slowdowns were not as large as had been forecast.
Despite the EUR/USD decline, however, Markit Chief Economist Chris Williamson stated that there was underlying strength in the Eurozone based on the figures;
‘Although the Eurozone Manufacturing PMI fell for a second successive month in February, the survey data indicate that factories are still enjoying their best growth spell for 18 years.
The average PMI for the first quarter so far is the second-highest since the spring of 2000, falling just short of the near-record peak seen in the fourth quarter of last year.
The broad-based nature of the upturn is especially welcome, with all surveyed countries reporting solid rates of expansion. Even Greece is enjoying its fastest growth for 18 years’.
The Euro saw a brief advance when Eurozone unemployment was reported at its lowest level since late 2008, but remains down on opening levels against the US Dollar. [based on xe’s chart, assuming this is accurate]
US Dollar to Euro (USD/EUR) Exchange Rate Firms after Fed Chair Powell’s Speech
The US Dollar advanced against the Euro (USD/EUR) today on residual optimism from Tuesday’s testimony session featuring Federal Reserve Chair Jerome Powell.
Mr Powell, who took over as head of the US central bank in early 2018, was discussing his plans and general outlook for the years ahead.
Although Powell remained relatively neutral in his comments, USD traders pounced on the remarks and some hawkish bets were for four US interest rate hikes in 2018.
The main statement fuelling this speculation was Powell’s observation that;
‘Some of the headwinds the U.S. economy faced in previous years have turned into tailwinds
In the (Federal Open Market Committee’s) view, further gradual rate increases in the federal funds rate will best promote attainment of both of our objectives’.
Euro to US Dollar Exchange Rate Forecast: EUR/USD Decline possible on Fed Chair’s Testimony
For the rest of the week’s trading, the Euro to US Dollar exchange rate (EUR/USD) could be most strongly influenced by additional testimony from Jerome Powell.
Mr Powell initially triggered a US Dollar advance on 28th February and may have a similar effect on USD today.
If the US Dollar does appreciate, the Euro will be pushed down in value by contrast.
Despite the possible boon of Powell’s comments today, there is no guarantee that the US Dollar won’t decline in value when more concrete economic news comes in.
Today’s high-impact US data releases will include personal income and spending figures for January, followed by a manufacturing activity PMI and Powell’s testimony.
Despite the potential for USD gains from Powell’s comments, income and spending levels are predicted to fall, as are levels of manufacturing activity in February.
Taking this into account, the Euro may be able to rise against the US Dollar before the end of the week.