Euro US Dollar (EUR/USD) Exchange Rate Muted as Bloc’s Manufacturing PMI Remains in Contraction Territory
The Euro US Dollar (EUR/USD) exchange rate remained flat and the pairing is currently trading at an inter-bank rate of $1.1170.
On Monday morning data revealed that manufacturing in the Eurozone continued to slow in May.
The Eurozone’s manufacturing PMI remained in contraction territory, falling from 47.9 to 47.7.
This was the fourth successive month the index fell.
However, the consumer goods sector has registered continuous expansion for five-and-a-half years.
Commenting on the data, Chief Business Economist at IHS Markit, Chris Williamson said:
‘Although the headline PMI fell in May, the decline masked slower rates of decline for both output and new orders. The forward-looking orders-to-inventory ratio also picked up for a second month running to reach a six-month high, the improvement of which augurs well for the downturn to moderate in June.
‘However, trade wars, slumping demand in the auto sector, Brexit and wider geopolitical uncertainty all remained commonly cited risks to the outlook, and all have the potential to derail any stabilisation of the manufacturing sector.’
US Dollar (USD) Flat Ahead of US-Mexico Trade Talks
On Monday US-Mexican talks are set to start.
There is a meeting scheduled between US Commerce Secretary Wilbur Ross and Mexican Economy Secretary Graciela Marquez.
This comes after US President Donald Trump’s announcement that 5% tariffs on all Mexican goods will start on 10 June.
The rates of these tariffs will increase in the coming months until it reaches 25%.
If Mexico does not make efforts to stop illegal immigration across the US-Mexican border tariffs will increase.
This weakened risk-appetite and weighed on the US Dollar on Monday.
Trump Administration Considers Aussie Trade Tariffs
Meanwhile, Australian Prime Minister, Scott Morrison downplayed speculation that the United States considered slapping trade tariffs on Australian aluminium last week.
It was reported that the Trump administration had discussed placing tariffs on Australian aluminium.
However, after being cautioned by the advisors that the decision could alienate a key ally in the Asia-Pacific region.
Euro US Dollar Outlook: Will Disappointing Eurozone Inflation Weigh on EUR?
Looking forward to this afternoon, the US Dollar (USD) could rise against the Euro (EUR) following the release of the US ISM manufacturing PMI.
The ‘Greenback’ could receive an upswing of support if the PMI rises higher than forecast.
Meanwhile, on Tuesday the single currency could slide following the release of the Eurozone’s flash Consumer Price Index (CPI).
If inflation does not rise as high as expected the Euro US Dollar (EUR/USD) exchange rate could fall.