Warning on Eurozone Confidence Levels Reduces EUR/USD Gains from PMI Data
This morning’s Eurozone PMI data has confirmed growth during June, but the Euro to US Dollar (EUR/USD) exchange rate has remained unfavourable despite this.
The Eurozone services PMI and overall composite PMI both showed growth, but there have been underlying concerns about Eurozone business confidence levels.
The worry is that signs of growth might be masking concerns about a potential EU trade war with the US, among other factors.
Highlighting the uncertainty currently present among Eurozone companies, IHS Markit Chief Business Economist Chris Williamson said:
‘The upturn in the pace of economic growth and resurgent price pressures adds support to the ECB’s view that stimulus should be tapered later this year, but the details of the survey also justify the central bank’s cautious approach to policy.
‘In particular, a weakening in business optimism to the lowest for over one-and-a-half years reflects intensifying nervousness about the outlook for the economy, notably in manufacturing, as trade-war talk escalates.’
US Dollar to Euro (USD/EUR) Exchange Rate Rises after China Rejects ‘First Shot’ Tariff Theory
The US Dollar (USD) has picked up against the Euro (EUR) and other currency peers this afternoon, thanks to signs of possible relief in the US-China trade war.
At present, both the US and China are poised to impose billions of Dollars worth of trade tariffs against each other this Friday.
The latest statements from the Chinese government suggest that there won’t be pre-emptive action on their part, with officials stating;
‘The Chinese government’s position has been stated many times. We absolutely will not fire the first shot, and will not implement tariff measures ahead of the United States doing so.’
The hope is that if the US relents and doesn’t implement tariffs on Friday then the crisis may be averted, at least temporarily.
Euro to US Dollar Exchange Rate Forecast: Will Eurozone Retail PMI Bring EUR/USD Recovery?
The Euro (EUR) has a chance to rise against the US Dollar (USD) on Thursday morning, although later in the day the USD could become the more dominant currency.
The early Eurozone data will be a measure of retail sector activity in June, which could raise EUR trader confidence if it exceeds the previous 51.7 points.
Thursday morning will also bring German factory and construction activity data, which could also support the single currency if the results show as-expected growth.
Looking further ahead, Thursday evening will bring the Federal Reserve minutes from their June monetary policy meeting; this led to a Fed interest rate hike.
If the minutes suggest that another rate hike is incoming then the US Dollar could rise rapidly against the Euro on Thursday evening.
USD traders are currently expecting four total interest rate hikes from the Fed this year; there have been two so far.