Euro US Dollar (EUR/USD) Exchange Rate Slumps as EC Warns of ‘Growing Headwinds’
UPDATE: The Euro US Dollar (EUR/USD) exchange rate slumped this afternoon, and the pairing is currently trading at around $1.1048.
The single currency slumped against the Dollar after the European Commission warned of ‘growing headwinds’ and downgraded growth forecasts.
The EU is now expected to grow by just 1.1% in 2019, and 2020 growth predictions have been cut to 1.2% from 1.4%.
Commenting on the forecasts, EC Vice President Valdis Dombrovskis said:
‘Economic growth has continued, job creation has been robust and domestic demand strong. However, we could be facing troubled waters ahead: a period of high uncertainty related to trade conflicts, rising geopolitical tensions, persistent weakness in the manufacturing sector and Brexit.’
Meanwhile, the number of Americans filing for unemployment benefits decreased by more than forecast last week, suggesting the US labour market continues to remain strong which likely buoyed the Dollar.
Euro US Dollar (EUR/USD) Exchange Rate Muted on Weak German Data
The Euro US Dollar (EUR/USD) exchange rate was left muted today, and the pairing is currently trading at around $1.1078 after weakening German data offset a rebound in Construction led by the country’s homebuilding industry.
The single currency was left muted against the US Dollar despite data revealing that homebuilding led a rebound in the German construction PMI.
However, a weakness in other German data, including commercial and civil engineering activity was partly attributed to a soft patch in new orders for the bloc’s largest economy, which likely dampened Euro sentiment.
Expectations for the future remain near August’s four-year low in October as businesses remain concerned about the impact of the manufacturing sector slowdown.
Commenting on this morning’s German data, Markit’s Principal Economist, Phil Smith said:
‘Back-to-back increases in September and October mean the construction PMI has recovered from August’s recent low and moved back into growth territory. The details of the survey, however, reveal that homebuilding is doing all the heavy lifting in terms of driving activity. Residential work has been the stand-out performer for most of 2019 so far, while the rest of the data for commercial and civil engineering activity remains pretty weak.’
US Dollar (USD) Flat on US-China ‘Phase One’ Delay Rumour
The US Dollar came under pressure today as an anonymous senior official from the Trump administration revealed the signing of a US-China trade deal might be delayed.
The long-awaited meeting between US President Donald Trump and his Chinese counterpart, Xi Jinping could be moved forward to December as both sides fail to agree on a location.
The official said it was still possible the ‘Phase One’ trade deal may not be reached, although a deal was more likely than no deal.
One location the pair have considered for their meeting is the NATO summit Trump is due to attend between the 3rd and 4th December in London.
The anonymous official said that London was ‘under consideration but nothing decided’ and revealed the President’s suggestion of Iowa had been ruled out.
US Productivity Slumps to Four Year Low
On Wednesday, data weighed on US Dollar sentiment when it revealed US productivity slumped to its lowest level since the final quarter of 2015.
American workers were unexpectedly less productive in the third quarter of 2019 which likely left USD flat against the Euro.
The US Labor Department showed that nonfarm productivity slumped by an annualised rate of -0.3% as output failed to keep up with hours worked.
Euro US Dollar Outlook: Will Weak German Exports Weigh on EUR?
Looking ahead to Friday, the Euro (EUR) could edge down against the US Dollar (USD) following the release of Germany’s imports and exports data.
If September’s exports fail to rise as high as forecast, showing the export-dependent German economy is continuing to suffer, the single currency could fall.
Meanwhile, the US Dollar could rise following the release of flash consumer sentiment data.
If sentiment rises for the third month in a row, this could see the Euro US Dollar (EUR/USD) exchange rate slump.