EUR/USD Exchange Rate Falls as Eurozone Economic Woes Continue
The Euro US Dollar (EUR/USD) exchange rate eased by -0.4% today, with the pairing currently trading around $1.109 after the Eurozone’s core inflation figure for December fell below the European Central Bank’s target of around 2% today.
This follows on from this week’s poor German growth figure for last year, which showed its weakest growth since 2013.
Germany’s Federal Statistical Office of Germany was downbeat in its analysis, saying:
‘The German economy thus has grown for the tenth year in a row. This has been the longest period of growth in united Germany. However, growth lost momentum in 2019… German exports continued to increase at an annual average in 2019, though at a slower pace than in the previous years.’
As a result, the EUR/USD exchange rate has remained subdued today, with single currency traders becoming increasingly concerned about the Eurozone’s powerhouse economy. Any further indications that Germany’s economy could struggle this year would dampen market confidence in the Euro.
Additionally, increasing doubts over the US-China ‘phase one’ trade deal is raising doubts on whether the trade-reliant German economy could face benefits from easing foreign trade relations this year, as Washington and Beijing remain on unsteady ground even after the signed agreement.
USD/EUR Exchange Rate Edges Higher on ‘Very Positive’ Consumer Sentiment for January
The US Dollar (USD) edged higher against a weak Euro (EUR) today despite a weaker-than-expected preliminary Michigan Consumer Sentiment Index, which fell from 99.3 to 99.1.
Ian Shepherdson, Chief Economist at Pantheon Macroeconomics, was mixed in his assessment:
‘Sentiment remains very positive, and consistent with strong growth in consumers’ sentiment but it’s no longer rising; the impact of higher gas prices appears to be offsetting the upward pressure from the rising stock market.’
The ‘Greenback’ continues to benefit from its safe-haven status, however, after China’s economic growth hit a near 30-year low today due to weak domestic demand a heated trade war with America.
However, US Dollar investors are quickly turning their attention to domestic political developments, with US President Donald Trump’s impeachment proceedings returning to eclipse the importance of economic data as the week closes.
EUR/USD Outlook: Could the Euro Sink Further on Weak German Economic Sentiment for January?
Euro (EUR) investors will be looking ahead to Monday’s release of Germany’s Producer Price Index report for December, with any signs of improvement providing a boost for the Euro as the Eurozone’s powerhouse economy shows signs of returning growth.
Tuesday’s German ZEW survey into economic sentiment for January, however, will drive the EUR/USD exchange rate early into next week. However, as this is expected to ease we could see the pairing slide.
US Dollar traders, meanwhile, will be looking further ahead to Wednesday’s release of the US housing sector reports. Any indications of deterioration in home prices and sales could weigh on the ‘Greenback’ as concerns for the American economy return.