Improved Eurozone Trade Conditions Boost Euro US Dollar (EUR/USD) Exchange Rate
Demand for the Euro (EUR) picked up this morning as February’s Eurozone trade surplus widened from 1.8 billion to 17.9 billion, bettering forecasts.
Confidence in the outlook of the Eurozone economy improved on the back of this sharp uptick in trade conditions, easing concerns over the impact of mounting global trade tensions.
Although the EU and US remain at odds over the threat of fresh tariffs this was not enough to stifle trade for the time being, giving the single currency a fresh boost.
This positive showing helped to overshadow news that the German Economy Ministry had cut its 2019 growth forecasts from 1.0% to 0.5%.
While worries over the outlook of the Eurozone’s powerhouse economy remain this failed to negatively impact the Euro to US Dollar (EUR/USD) exchange rate today.
US Dollar (USD) Exchange Rates Vulnerable to Widened US Trade Deficit
The EUR/USD exchange rate could gain further ground this afternoon on the back of the latest US trade data.
As forecasts point towards the US trade deficit continuing to widen in February, increasing from -51.1 billion to -53.6 billion, the mood towards the US Dollar (USD) looks set to sour.
With the US trade spats with China and the EU showing no signs of immediate resolution the world’s largest economy remains at risk of a further slowdown in exports.
Another widening of the trade deficit would leave investors with little incentive to buy into the US Dollar at this stage, adding to existing anxiety over the outlook of the US economy.
On the other hand, if trade conditions show signs of improvement this could encourage USD exchange rates to recover some of their lost ground.
However, if Federal Reserve policymakers continue to send cautious signals over the monetary policy outlook this may keep the US Dollar on the back foot.
Weak Eurozone Manufacturing PMIs Raise Risk of Euro (EUR) Losses
Fresh pressure could be in store for the EUR/USD exchange rate ahead of the Easter weekend, though, with the release of April’s raft of Eurozone manufacturing and services PMIs.
If growth across the Eurozone economy fails to show signs of improvement this could drive the Euro into a fresh slump against its rivals.
With the German manufacturing PMI forecast to remain within contraction territory demand for the single currency looks set to diminish on Thursday.
Unless the manufacturing sector returns to a state of positive growth EUR exchange rates appear vulnerable to selling pressure in the near term.
As Eurozone growth appears on course to weaken over the course of the year the chances of the European Central Bank (ECB) returning to a hawkish policy outlook seem limited.
Even if market risk appetite improves a lack of positive economic data could easily leave the EUR/USD exchange rate on a weaker footing in the days ahead.