Euro US Dollar (EUR/USD) Exchange Rate Muted as ECB Leave Rates Unchanged
UPDATE: The Euro US Dollar (EUR/USD) exchange rate was left flat on Thursday afternoon.
The pairing is currently trading at an inter-bank rate of $1.1158.
The European Central Bank (ECB) left interest rates unchanged which likely provided the single currency with some relief.
However, the bank did leave the door open to rate cuts as markets expected.
The bank said it saw rates at the current level or lower through mid-2020, giving up its previous pledge to keep rates unchanged until June 2020.
Speaking at a news conference, ECB President Mario Draghi noted that the ‘outlook is getting worse and worse’.
Draghi also noted that a once hoped-for rebound in the second half of 2019 was ‘less likely’.
Meanwhile, the US Commerce Department revealed that US durable goods orders rebounded in June, rising by a higher-than-forecast 2%.
Orders for machinery rose by the most in close to one-and-a-half years in June.
However, this could do little to buoy the ‘Greenback’ against the single currency.
Euro US Dollar (EUR/USD) Exchange Rate Flat Markets Price in 50% Chance of ECB Rate Cut
The Euro US Dollar (EUR/USD) exchange rate remained muted and the pairing is currently trading at an inter-bank rate of $1.1142.
The Euro remained under pressure ahead of today’s European Central Bank (ECB) meeting.
Earlier the EUR/USD exchange rate fell to a two-month low.
It is largely expected policymakers will leave interest rates unchanged this afternoon.
However, there’s a 50% chance the bank will slash rates to an all-time low of -0.10%.
Commenting on the potential cut from the ECB, and Kit Juckes, Macro Strategist at Societe Generale noted:
‘I doubt that anything the ECB does or says provides much comfort [for the Euro]’
Euro (EUR) Muted as German Sentiment Continues to Plummet
Meanwhile, on Thursday morning data revealed that Germans have lost their optimism.
July’s Ifo business climate index dropped for the tenth time over the last 11 months.
The index slumped further from June’s 97.5 to 95.7 in July, the lowest level since late 2012.
Commenting on this, Rates Strategist at Commerzbank, Michael Leister said:
‘Today the Ifo isn’t a surprise after yesterday’s data, and it adds to the ongoing deterioration.
‘We are calling for rate cuts and it is worthwhile keeping in mind that it is also about QE (asset purchases), which is moving into market focus.’
US Dollar Flat as US Manufacturing Downturn Deepens
On Wednesday, the Markit US flash PMI composite edged up from June’s three-year low of 51.5 to 51.6 in July.
A manufacturing downturn was offset by strong gains in the service sector which recorded the strongest rise in business activity since April.
Commenting on yesterday’s data, Chief Business Economist at IHS Markit, Chris Williamson said:
‘The overall picture of modest growth conceals a two-speed economy, with steady service sector growth masking a deepening downturn in the manufacturing sector. The survey’s gauge of factory production has slumped to its lowest since August 2009, and indicates that manufacturing output is falling at a quarterly rate of over 1%, led by an increasing rate of loss of export sales.
‘Future prospects have also darkened to the gloomiest since comparable data were first available in 2012, suggesting that companies may look to tighten their belts further in coming months, dampening spending, investment and jobs growth. Geopolitical worries, trade wars and increasingly widespread expectations of slower economic growth at home and internationally have all pulled business optimism lower.’
Euro US Dollar Outlook: Will Better than Expected US Durable Goods Orders Buoy USD?
This afternoon, the US Dollar (USD) could rise against the Euro (EUR) following the release of the US durable goods orders.
If durable goods orders rebound in June, it could provide the ‘Greenback’ with an upswing of support.
Meanwhile, Friday’s US GDP growth data could cause the Dollar to slump.
If Q2 growth disappoints, investors may price in a larger Federal Reserve interest rate cut, buoying the Euro US Dollar (EUR/USD) exchange rate.