Turkish Tensions Continue to Weigh on Euro US Dollar (EUR/USD) Exchange Rate
As tensions continued to flare between Turkey and the US this limited the potential for the Euro to US Dollar (EUR/USD) exchange rate to recover from its recent bout of weakness.
Concerns remain over the future of the Turkish economy, with the imposition of tariffs on a number of US goods risking a further escalation of the financial crisis.
Given the risk that the weaker Turkish Lira (TRY) potentially poses to the wider European banking sector the mood towards the Euro (EUR) is still jittery.
After the significant losses seen last week, though, the decline of the single currency has eased somewhat.
If the Lira can stabilise in the days ahead this should limit the negative bias of EUR exchange rates.
Analysts at TD Securities noted:
‘As long as the crisis remains mainly isolated to Turkey, spillovers to the euro area and other G10 countries are likely to be muted. The ECB remains on track to continue its taper later this year and raise rates in 2019H2.’
EUR/USD Exchange Rate Gains Forecast on Weaker US Retail Sales
The Euro to US Dollar (EUR/USD) exchange rate could find some support this afternoon, however, if July’s US advance retail sales slow as forecast.
Investors anticipate sales growth easing from 0.5% to just 0.1% on the month, underlining a general weakening in domestic sentiment.
This could diminish the appeal of the US Dollar (USD), denting confidence in the outlook of the world’s largest economy.
Signs of softness in July’s US manufacturing and industrial production figures may also put pressure on USD exchange rates, even in the face of elevated market risk aversion.
However, anything short of a significant deterioration is unlikely to alter investor expectations of the Federal Reserve continuing to tighten monetary policy in the months ahead.
If the data betters expectations, though, this could see the US Dollar extending its recent bullish run further.
Widened Eurozone Trade Surplus to Support Euro US Dollar (EUR/USD) Exchange Rate
Thursday’s Eurozone trade balance figure may offer the Euro to US Dollar (EUR/USD) exchange rate a rallying point.
Expectations point towards the trade surplus widening from 16.5 billion to 18 billion in June, in spite of mounting global tensions over trade.
Evidence that the Eurozone economy continued to expand its trade surplus even as US protectionism and tariffs weighed on global sentiment would give the Euro a solid boost against its rivals.
Any narrowing of the surplus, on the other hand, could push EUR exchange rates lower across the board.
Volatility is also likely in response to July’s German wholesale price index data, with investors keen to gauge the inflationary outlook.
An indication that price pressures within the Eurozone’s powerhouse economy are continuing to mount may help the Euro to US Dollar (EUR/USD) exchange rate recover lost ground.