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Euro US Dollar (EUR/USD) Exchange Rate Flat as US Manufacturing PMI Slides to 116-Month Low

Euro US Dollar (EUR/USD) Exchange Rate Muted as US PMI Slides to Three-Year Low

The Euro US Dollar (EUR/USD) exchange rate remained muted and the pairing is currently trading at an inter-bank rate of $1.1162.

May’s IHS Markit flash US PMI revealed that business activity growth slipped to a three-year low.

The US flash composite PMI slipped to 50.9 from 53, and the manufacturing PMI registered 50.6 in May, a 116-month low.

As a result of this, the US Dollar was left muted against the Euro.

Commenting on the data, Chris Williamson, Chief Business Economist at IHS Markit said:

‘Growth of business activity slowed sharply in May as trade war worries and increased uncertainty dealt a further blow to order book growth and business confidence.

‘A decline in the headline ‘flash’ PMI to its lowest for three years pushes the survey data down to a level historically consistent with GDP growing at an annualised rate of just 1.2% in May.

‘However, an additional concern is the spreading of the malaise to the service sector, growth of which slumped in May to one of the weakest since the global financial crisis. With the service sector’s performance being a key gauge of the health of domestic demand, this broadening-out of the slowdown poses downside risks to the outlook.’

Euro (EUR) Flat as Bloc’s Optimism Slides to Four-and-a-Half Year Low

On Thursday, the Euro was weakened by a slew of disappointing data from the Eurozone.

May’s flash Markit PMI composite for the bloc revealed that the pace of growth remained subdued in May.

The Eurozone’s PMI composite edged up to 51.6 from 51.5 in April.

Despite the increase, the data revealed that jobs growth slipped to the joint-lowest since 2016.

Added to this, optimism about the future slumped to a four-and-a-half year low which likely weighed on EUR.

Commenting on the data, Chief Business Economist at IHS Markit, Chris Williamson said:

‘A renewed deterioration in optimism about the year ahead suggests that the business situation could deteriorate further in coming months. Worries reflected concerns over lower economic growth forecasts, signs of weaker sales and rising geopolitical uncertainty, with escalating trade wars and auto sector woes commonly cited as specific causes for concern.’

US Dollar (USD) Muted as Federal Reserve ‘Out-Doved’

On Thursday, the US Dollar hit its highest level in a month as political uncertainties spread through Asia and Europe.

Trade tensions between the US and China buoyed the safe-haven US Dollar.

Commenting on this, FX Strategist at BNY Mellon, Neil Mellor said:

‘Certainly the Dollar has been acting like something of a safe haven even though the Fed has been more dovish than has been expected.

‘I think what’s happened is that the Fed has been ‘out-doved’ by other central banks one by one […] and that has allowed the Dollar to strengthen.’

Euro US Dollar Outlook: Will Disappointing US Durable Goods Orders Weigh on USD?

Looking ahead to Friday, the US Dollar (USD) could slide against the Euro (EUR) following the release of the US non-defense capital goods orders (excluding aircraft).

If capital goods orders contract further than forecast in April, it could dampen sentiment in the ‘Greenback’.

The dollar could slide further following the release of the US durable goods orders.

If April’s durable goods orders slump further than forecast it could cause the Euro US Dollar (EUR/USD) exchange rate to rise.