Euro US Dollar Exchange Rate Wavers as Euro Recession Edges Closer
The Euro US Dollar (EUR/USD) exchange rate is trading narrowly today in the wake of Eurozone PMIs further highlighting a slowing economy.
At time of writing the EUR/USD exchange rate is trading around $1.0313, relatively unchanged from this morning’s opening levels.
Euro (EUR) Muted amid Escalating Recession Fears
The Euro is struggling for demand today despite a moderately better-than-expected PMI data release.
The manufacturing sector narrowly avoided a tenth consecutive month of declining activity as it printed at 47.3. But remaining firmly in contraction territory, the modest improvement did little to quell recession fears. Meanwhile, services remained unchanged from October’s 48.6, a 21-month low, and a fourth straight month of contraction.
Despite inflationary pressures easing modestly, with the rate of decline easing compared to October, recession fears continue to mount. Chris Williamson, Chief Business Economist at S&P Global, said of the data:
‘A further fall in business activity in November adds to the chances of the eurozone economy slipping into recession. So far, the data for the fourth quarter are consistent with GDP contracting at a quarterly rate of just over 0.2%.’
Lending some modest support to the Euro, however, is the easing of economic slowdown in the Euro area, potentially revealing a cooling of inflation. Bert Colijn, Senior Economist at ING, reveals an upside to the downbeat PMI data:
‘The upside to the clearly recessionary environment is that inflationary pressures are fading. Weaker demand, lower energy prices than in August, and easing supply-side problems are all contributing to a softening of price pressures.’
Elsewhere, comments from the German Chancellor have provided some modest support for the Euro. With an energy crisis looming, Scholz gave reassurances that energy security is guaranteed as Eurozone members continue to work together:
‘We won’t be able to completely stop energy price increases with subsidies, but we can reduce them to a bearable level.
We’re doing away with the failings of an energy and trade policy that has led us into one-sided dependence on Russia and China in particular.’
US Dollar (USD) Subdued as Markets Brace for FOMC Minutes
Meanwhile, the US Dollar remains relatively quiet ahead of a flurry of data releases. Highly-anticipated Federal Open Market Committee (FOMC) meeting minutes also feature on today’s docket.
With inflationary pressures beginning to ease, and some rare dovish comments from Federal Reserve policymakers, the ‘Greenback’ has found itself under rare pressure. With expectations of another 75bps rate hike fading by the day, USD investors will be eagerly anticipating any further monetary guidance from the last meeting.
Meanwhile, a slowdown in safe-haven flows is also weighing on the US Dollar. Slightly better-than-expected Eurozone PMIs are sapping demand for safe-haven currencies as the market cheers a slowdown in inflationary pressures.
Euro US Dollar Forecast: FOMC Meeting Minutes to Boost the Greenback?
Looking ahead, the Euro US Dollar exchange rate could see further movement. The release of the minutes from the last policy meeting could weigh on the US Dollar. If policymakers appear more dovish, the US Dollar could slide on rate hike expectations.
Meanwhile, the Euro will be left to trade on market sentiment. Without any further data until Friday, several speeches from European Central Bank (ECB) members could influence the Euro tomorrow.
