EUR/USD Exchange Rate Steady, Eurozone Economic Woes Continue
The Euro US Dollar (EUR/USD) exchange rate held steady today, with the pairing currently trading around $1.108 after Germany’s PPI report for December confirmed consensus and edged higher from 0% to 0.1%, whilst the yearly figure dipped at -0.2%.
Euro traders have remained on the defensive, however, after last week’s US-China trade deal has failed to boost market appetite for the single currency. This is because Germany’s economy – which is the powerhouse of the Eurozone – is continuing to struggle, and with rising doubts over Washington-Beijing relations returning, the bloc’s economic outlook looks dim.
Germany’s central bank, the Bundesbank, has also predicted that the economy grew last year at its slowest pace since the Eurozone’s financial crisis in 2013.
International Monetary Fund Chief Economist Gita Gopinath was also downbeat, commenting:
‘While there are signs of stabilisation, the global outlook remains sluggish and there are no clear signs of a turning point.’
The EUR/USD exchange rate has remained steady, however, as markets have already priced in a gloomy outlook for the Eurozone’s largest economy in 2020.
USD/EUR Exchange Rate Rangebound, US Markets Closed for Martin Luther King’s Birthday
The US Dollar (USD) remained steady against many of its peers today as US markets close for Martin Luther King’s birthday, which is a bank holiday on the American calendar.
However, the ‘Greenback’ continues to benefit from a generally robust outlook for the US economy this year, with the Federal Reserve expected to remain unmoved in its next policy statement as the economy is set to improve post-‘phase one’ trade agreement with Beijing.
There are also emerging doubts about whether relations will remain steady between the world’s two largest economies.
Chad Brown, the Senior Fellow at the Peterson Institute for International Economics, commented:
‘That’s a giant hole in the Phase One deal, and there’s no way to get around it, we’re no closer today to resolving any of those fundamental frictions than we were before the trade war started’.
Meanwhile, Philadelphia’s Fed President Patrick Harker said that US business investment had been flagging, although he hoped that the new US-China trade pact would ‘unleash business investment’ and hold back stimulus measures from the central bank.
EUR/USD Outlook: Could the Euro Rise on Improving Economic Sentiment?
Euro (EUR) investors will be looking ahead to tomorrow’s release of January’s German ZEW Survey of economic sentiment. Any signs of improvement at the beginning of 2020 could boost confidence in EUR as the outlook for the Eurozone’s largest economy improves.
US Dollar traders, meanwhile, will be looking further ahead to Wednesday, which will see the release of US housing figures. If US house prices improve, we could see the ‘Greenback’ begin to gain as America’s economy continues to improve.