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Euro US Dollar (EUR/USD) Exchange Rate Muted as German Investors Mood Improves despite Recession Fears

Euro US Dollar (EUR/USD) Exchange Rate Left Flat as German Investors’ Mood Improved Slightly

The Euro US Dollar (EUR/USD) exchange rate was left muted, and the pairing is trading around $1.1018.

The single currency was left muted against the Dollar as data revealed that German investors were slightly optimistic about the future, but increasingly pessimistic about the current economic situation.

Tuesday’s German ZEW Economic Sentiment Index revealed mood among investors improved slightly in September.

With the German economy on the edge of falling into a recession, the better-than-expected reading of -22.5 likely provided the single currency with a slight upswing of support.

However, in a separate measure, the index for German current situations slumped from -13.5 to a lower-than-expected -19.9.

This was the lowest reading of this index since May 2010 which likely left the single currency under pressure.

US Dollar (USD) Muted as the Market Left in Limbo

The market was left flat as traders await the outcome of Wednesday’s Federal Reserve policy meeting.

Meanwhile, the weekend’s oil attacks offset any losses in the Dollar as US President Donald Trump authorized use of an emergency stockpile.

The US President has also stated he has no interest in war with Iran, which likely alleviated some market risk.

Commenting on the attacks on Saudi Arabian refining facilities, senior market analyst at Gain Capital, Matt Simpson said:

‘The market is in limbo between the oil price shock and the Fed meeting.

‘Like any price shock, people go: ‘What the hell has happened? What do we make of that […] it didn’t really spill over to currency markets like we might have expected.’

The ‘Greenback’ was left muted as the Fed is expected to slash rates by 25 basis points.

While the probability of a rate cut has eased, expectations the bank will slash rates twice before Christmas remain high.

Commenting on this, Yukio Ishizuki, senior strategist at Daiwa Securities noted:

‘Markets are pricing in two additional rate cuts by next year but the Fed is unlikely to make such a forecast, so we could see further gain in the Dollar.’

Euro US Dollar Outlook: Will Weak Inflation Weigh on EUR?

Looking ahead to this afternoon, the US Dollar (USD) could rise against the Euro (EUR) following the release of August’s industrial production data.

If US production rebounds from July’s slump, it could provide an upswing of support for the ‘Greenback’.

Looking to Wednesday morning, the single currency could edge lower against USD following the release of the bloc’s inflation rate.

If inflation remains firmly below the European Central Bank’s (ECB) target, the Euro US Dollar (EUR/USD) exchange rate is likely to fall further.