The Euro (EUR) has fallen slightly against the US Dollar (USD) this afternoon, trading at a level of $1.669.
This minor decline in the EUR/USD exchange rate comes from a muted reception to July’s finalised Eurozone manufacturing PMI.
Although levels of sector activity were reported higher, they didn’t reach the levels that some EUR traders had originally forecast.
(Last updated 1st August, 2018)
Estimates for Higher Eurozone Inflation Boost EUR/USD Exchange Rate
The Euro (EUR) has firmed against the US Dollar (USD) today, hitting an exchange rate of $1.1738.
This is resilient trading in the face of the latest Eurozone data, which has revealed a faster pace of inflation but slowing GDP growth.
On the plus side, July’s annual Eurozone inflation rate flash has shown a rise from 2% to 2.1%, moving above the European Central Bank (ECB) target.
This raises the odds of an early-2019 interest rate hike from the ECB, so has been seen as a positive development.
On the other hand, however, quarterly and annual GDP Q2 growth rate estimates have slowed from previous figures.
The Euro’s advance against the US Dollar today suggests that EUR traders are more optimistic than pessimistic, focusing on inflation over GDP.
Sliding Manufacturing Reading Causes US Dollar to Euro Exchange Rate Losses
The US Dollar (USD) has been in low demand today, making losses against the Euro (EUR) and other peers after Monday’s disappointing manufacturing data release.
The Federal Reserve Bank of Dallas reported that manufacturing activity slowed in July, dropping from 36.5 points to 32.3.
Although this result beat forecasts for a worse decline to 31 points, it has still been seen as bad news by USD traders.
The US Dollar has also been limited by USD trader uncertainty about Wednesday evening’s Federal Reserve interest rate decision.
This isn’t expected to show any change to interest rates, but might bring hints about when the next rate hike is likely to occur.
Euro to US Dollar Exchange Rate Forecast: Are EUR/USD Losses ahead on US Spending Stats?
The Euro (EUR) may have weathered the effects of today’s disappointing GDP figures, but is still at risk of declining against the US Dollar (USD) later today.
This afternoon will bring US personal income and spending stats for June, which are predicted to show spending growth levels increase from 0.2% to 0.4%.
Levels of income growth are tipped to remain at 0.4%, but both results could support the US Dollar and trigger a USD/EUR exchange rate rise.
Accelerating levels of consumer spending would suggest that consumer confidence is rising and income levels are supportive.
Ultimately, as-forecast results would raise the odds of a near-term Federal Reserve interest rate hike; there have so far been two of an expected four hikes in 2018.
Future EUR/USD Exchange Rate Forecast: Can Euro Advance on Eurozone PMI Growth?
For Euro traders, Wednesday morning’s Eurozone PMIs might support the single currency and cause EUR/USD gains if the results match up with forecasts.
The finalised readings for July are expected to confirm that sector activity rose during the month; such results could raise EUR trader confidence and push the Euro up.
Of particular importance is Germany’s manufacturing PMI, which is predicted to rise from 55.9 points to 57.3.
Manufacturing is a key component of German economic growth, so a rise here could be enough to boost optimism among Euro traders.