EUR/USD Exchange Rate Jumps as Geopolitical Uncertainty Drags on US Dollar
The Euro US Dollar (EUR/USD) exchange rate stuck higher during today’s trading session as rising geopolitical tensions weighed heavily on markets.
At the time of writing EUR/USD exchange rate has strengthened 0.4%, striking its highest levels since late March.
Rebound in US Retail Sales Fails to Support US Dollar (USD)
The US Dollar (USD) has suffered a heavy sell off today, falling sharply against the Euro (EUR) and most of its other peers despite some positive retail sales figures.
According to data published by the US Commerce Department, domestic retail sales growth rose from -0.1% to 0.6% in March, ending a three-month run of declines and beating expectations that they would expand a more modest 0.4%.
The better than expected reading came as a welcome relief to markets and should help to shore up US economic growth in the first quarter.
However while sales figures printed positively, it was not enough to prevent the US Dollar exchange rate from extending its losses against the Euro today as markets await the announcement of further sanctions against Russia over its role in Syria.
Investors fear that the decision to implement further sanctions on Russia will prompt another escalation in geopolitical tensions, which is seen as having a negative impact on the US Dollar exchange rate.
Euro (EUR) Steady despite Economists Becoming less Enthusiastic on Growth Prospects
At the same time the Euro exchange rate has advanced today despite economists becoming increasingly pessimistic in their outlook for the Eurozone.
This can be seen in the latest Bloomberg survey of economists, which has seen the bloc’s growth projections downgraded on both a quarterly and annual basis.
A run of disappointing economic data has seen survey respondents suggest that after racing higher in 2017, growth in the Eurozone is likely to moderate this year.
However some analysts remain cautious optimistic as they suggest that the current slowing of growth may be a temporary blip and shouldn’t result in the European Central Bank (ECB) altering its plans to wind up its monetary stimulus.
Marco Valli, chief euro-area economist at UniCredit Bank in Milan said;
‘I don’t think we should extrapolate too much on what might be a temporary decline, You’re picking up from a very high level and data suggests the euro zone is growing above potential.
There is certainly higher uncertainty, but I don’t think it carries policy implications yet.’
EUR/USD Forecast: Slide in Economic Sentiment Index to Publish EUR?
Looking ahead the EUR/USD exchange rate is expected to trend lower on Tuesday following the release of the Eurozone’s latest economic sentiment index.
The index is expected to have slid from 13.4 to 7.3 in April as the survey of economists shows forecasts are becoming increasingly pessimistic for the Eurozone this year after the bloc’s blistering pace of growth in 2017.
Meanwhile the US Dollar may look to mount a recovery tomorrow following a speech from Federal Reserve Chicago President Charles Evans.
Especially if in light of last week upbeat inflation figures hints that the door remains open for the possibility of up to three more rate hikes from the bank this year.