Euro US Dollar (EUR/USD) Exchange Rate Muted Ahead of Fed and ECB Meetings
The Euro US Dollar (EUR/USD) exchange rate remained muted on Tuesday, leaving the pairing trading at around $1.1082.
The pairing was left flat as markets remained wary of the looming deadline for US tariffs on Chinese exports.
The Dollar was neutral against a handful of major currencies ahead of the US Federal Reserve and European Central Bank (ECB) meetings.
commenting on this, in a message to clients, ING wrote:
‘[This is] reflecting limited anticipation for a change from both the Fed and ECN meetings this week as well as uncertainty about the Dec. 16 tariff deadline.’
The Fed is expected to leave rates steady tomorrow, and markets also expect the ECB to leave rates unchanged.
Following the Fed meeting, investors will likely look ahead and focus on US-China trade negotiations.
US Dollar (USD) Flat as Markets Eye Scheduled US Tariffs
Global markets continue to bet the US and China will reach a deal, meaning further tariffs will not be implemented.
Last week, White House adviser Larry Kudlow stated the 15th December deadline was still in place.
However, Bloomberg reported that the US was unlikely to implement tariffs, and according to US Agriculture Secretary Sonny Perdue:
‘We have a deadline coming up on the 15th December for another tranche of tariffs, I do not believe those will be implemented and I think we may see some backing away.’
Added to this, US President Donald Trump said he did not want to hit China with further tariffs, but wanted to see ‘movement’ from Beijing.
Euro (EUR) Flat as German Economic Sentiment Rebounds
The single currency received a boost on Tuesday after data showed the mood among German investors improved more than expected.
December’s ZEW Economic Sentiment Index jumped to 10.7 from November’s -2.1. This increased hopes for an economic rebound in the bloc’s largest economy as this was the first month since April the index has clawed its way out of contraction, and the highest since February 2018.
Added to this, in a separate gauge measuring investors’ assessment of current conditions, the index rose from -24.7 to -19.9 in December.
Commenting on the rise in German sentiment, ZEW President Achim Wambach noted the rise ‘rests on the hope that German exports and private consumption will develop better than previously thought.’
Meanwhile, on Monday the Euro received support following an unexpected rise in German exports.
The increase in exports has increased hopes the weak manufacturing sector can avoid contraction in the final quarter despite a slew of negative indicators.
Euro US Dollar Outlook: Will Strong Inflation Buoy USD?
Looking ahead to this afternoon, the US Dollar (USD) could edge lower against the Euro (EUR) following the release of Q3 non-farm productivity.
If productivity slumps more than expected in the three months to September, ‘Greenback’ sentiment will slide.
Meanwhile, the Dollar could rebound on Wednesday following the release of November’s US inflation rate.
If inflation remains strong, meeting the US Federal Reserve’s target, the Euro US Dollar (EUR/USD) could slump.