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Euro US Dollar (EUR/USD) Exchange Rate Muted as Confidence in Eurozone Outlook Weakens

Euro US Dollar (EUR/USD) Exchange Rate Fails to Benefit From Solid Eurozone PMIs

The slightly disappointing nature of August’s Eurozone manufacturing and services PMIs left the Euro to US Dollar (EUR/USD) exchange rate on a narrow trend.

While the Eurozone composite index showed a modest uptick on the month from 54.3 to 54.4 this failed to encourage any particular Euro (EUR) boost.

Even though the currency union continued to demonstrate solid economic growth in August the underlying details of the picture were not overly encouraging.

With factory orders and exports lingering at multi-month lows the chances of the Eurozone picking up further momentum in the months ahead appeared to decline.

This left EUR exchange rates on a weaker footing ahead of the release of the European Central Bank’s (ECB) July meeting minutes.

US Dollar (USD) Supported as Fed Minutes Pave Way for September Interest Rate Hike

Overnight, the release of the minutes from the Federal Open Market Committee’s (FOMC) August meeting put some pressure on the Euro to US Dollar (EUR/USD) exchange rate.

In spite of increasing political pressure the Fed appears to remain on track to raise interest rates again imminently.

As analysts at Deutsche Bank noted:

‘The discussion of the economic outlook was slightly more balanced than previously, as downside risks from trade, housing, and emerging markets have intensified somewhat. FOMC members seem to broadly agree that another interest rate hike will be warranted soon paving the way for a September hike (Bloomberg implied odds at 92%).’

Even so, USD exchange rates struggled to push higher on Thursday thanks to the sense of political turmoil that still hangs over the White House.

If pressure on the Trump administration continues to build this could keep the US Dollar (USD) on the back foot for some time to come.

US Housing Sales Recovery to Limit Euro US Dollar (EUR/USD) Exchange Rate Upside

A solid performance from this afternoon’s US housing data could put the Euro to US Dollar (EUR/USD) exchange rate under further pressure.

Forecasts point towards a solid rebound in new home sales on the month in July, although the expected 2.2% uptick would not entirely balance out June’s -5.3% decline.

Nevertheless, any signs of renewed strength within the US housing market could encourage greater confidence in the US Dollar, even in the face of political jitters.

On the other hand, another increase in jobless claims may give investors fresh incentive to pile out of USD exchange rates ahead of the weekend.

With markets bracing for the latest commentary from Federal Reserve Chair Jerome Powell at the Jackson Hole economic symposium, however, the potential for a US Dollar rally remains.

Further signs of hawkishness could see the Euro to US Dollar (EUR/USD) exchange rate soften, even though the odds of a September interest rate hike are already high.