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Euro US Dollar Exchange Rate News: EUR/USD Faces Headwinds as Turkey’s Currency Crisis Dominates Market Sentiment

EUR/USD Exchange Rate Rocked by Lira Meltdown

The Euro US Dollar (EUR/USD) exchange rate continues to tread water this morning as the sell-off in the Turkish Lira (TRY) continues to engulf markets.

At the time of writing the EUR/USD exchange rate is currently edging up by around 0.1% this morning with the pairing holding close to the on-year low struck on Monday.

Euro (EUR) Exchange Rates Pressured by Turkey Jitters

The Euro (EUR) remains close to a one-year low against the US Dollar (USD) this morning as markets continues to raise concerns about the Eurozone’s exposure to Turkey’s current economic woes.

Turkey is currently in the midst of a currency crisis, which has seen the Turkish Lira (TRY) shed about a third of its value in less than a week on concerns over high inflation and central bank interference.

This has in turn spooked many EUR investors as analysts worry that this could have dire consequences for the Eurozone due to the large sums of money some European banks have invested in Turkey.

However despite this not all economists are concerned, with Yukio Ishizuki, senior strategist at Daiwa Securities suggesting:

‘The Turkish lira remains volatile and it is too early to say the lira has settled down. For now, currencies will be driven by the Turkish lira.

‘But the euro’s fall on worries about European banks’ exposure to Turkey seems a bit overdone, considering that their scale is not that huge.’

Strong German GDP Helps to Buoy Euro US Dollar (EUR/USD) Exchange Rate

At the same time the Euro has been prevented from extending its losses against the US Dollar (USD) this morning thanks to some stronger-than-expected German GDP figures.

According to the latest GDP estimate published by Germany’s federal statistics agency, the German economy expanded by 0.5% in the second quarter, beating forecasts of a modest 0.3% expansion, while first quarter growth was revised up to 0.4%.

The upswing appeared to be largely driven by strong household and state spending, with growth appearing to overcome any concerns about trade disruption.

EUR/USD Exchange Rate Forecast: Will Eurozone GDP also impress?

Looking ahead, the Eurozone will also publish its latest GDP estimate later this morning, which following of from Germany’s faster-than-expected growth could lift the overall reading for the entire bloc.

Such an outcome could help to give the Euro US Dollar (EUR/USD) exchange rate the shot in the arm needed to break out from its current subdued levels.

Meanwhile with no major US economic releases today, movement in the US Dollar is likely to continue to be driven by the current emerging market sell-off and contagion fears of the Turkish Lira.