EUR/USD Exchange Rate Falls, Euro Traders Brace for German Inflation Data
The Euro US Dollar (EUR/USD) exchange rate fell by -0.3% today, with the pairing currently trading around $1.11 after December’s German Unemployment Change figure rose above forecasts to 8 thousand.
Claus Vistesen, Chief Eurozone Economist at Pantheon Macroeconomics, was downbeat in his assessment, commenting:
‘A poor finish to 2019 in the German labour market, but an increase in claims was all but guaranteed given the significant decline recorded in November. Overall, joblessness has now been rising slightly since the middle of last year – not factoring-in the jump in May due to re-classification of some workers – consistent with a lagged response to the sharp slowdown in GDP growth.’
However, we could see the Euro (EUR) claw back some of its losses later on today if the flash German inflation figure for December confirms forecasts and rises from 1.2% to 1.4%, as this would improve the economic outlook for the Eurozone’s largest economy.
The UK’s Brexit is also causing some concern for Euro traders today, with fears mounting that the UK’s exit from the European Union, which is due to take place on the 31st January, could have a negative impact on the bloc’s economy in the near-term.
USD/EUR Exchange Rate Rises on ‘Greenback’ Safe-Haven Demand as US-Iran Tensions Flare-Up
The US Dollar (USD) benefited from its safe-haven status this morning after US President Donald Trump stoked geopolitical tensions following a White House-ordered air strike on General Qasem Soleimani, which soured relations between Washington and Tehran.
Olivier Jakob, managing director of Petromatrix, commented:
‘The killing of Soleimani calls for a serious increase of the geopolitical risk premium.
‘This was supposed to be a holiday week for many traders. Many will be cutting the holidays short and call-in for an emergency risk meeting.’
Meanwhile, USD investors are awaiting today’s release of the US ISM Manufacturing PMI for December, which is expected to improve from 48.1 to 49. However, as the index is expected to remain stuck in contraction territory, it is unlikely to provide much uplift for the ‘Greenback’.
Today will also see the publication of The Federal Open Market Committee’s minutes, which could provide some insight into America’s economic outlook for 2020. Any signs of dovishness from the Fed, however, would prove USD-negative.
EUR/USD Outlook: Eurozone and US Composite PMIs in Focus
Looking ahead to next week, Euro (EUR) investors will be awaiting Monday’s release of the German Markit PMI Composite figure for December, which is expected to rise slightly to 49.5. However, any signs of the index emerging from contraction territory would boost the EUR/USD exchange rate as the bloc’s largest economy shows signs of improvement.
This will be followed by November’s German Retail Sales figure, which is expected to rise from -1.9% to 1%.
US Dollar (USD) traders, meanwhile, will be awaiting Monday’s release of the US Markit PMI Composite for December, which is expected to remain at a strong 52.2.
US-China trade developments will also continue to drive the EUR/USD exchange rate, with any further indications that a phase one trade deal could be signed off on the 15th January likely weakening the ‘Greenback’s safe-haven appeal as traders flock to riskier assets instead.