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Euro US Dollar Exchange Rate Steady, European Markets Brace for ECB Rate Decision

EUR/USD Exchange Rate Rangebound, Could the Euro Sink on Dovish ECB Statement?

The Euro US Dollar (EUR/USD) exchange rate held steady this morning, with the pairing currently trading around $1.108 ahead of the European Central Bank’s (ECB) interest rate decision and monetary policy statement due this afternoon.

Euro traders are remaining cautious this morning, with the ECB expected to hold its interest rate at 0% while the newly-appointed central bank President, Christine Lagarde, due to launch her strategic review.

Carsten Brzeski, Chief Germany economist at ING, commented about the Eurozone’s economic health:

‘There is still the risk that the lagged impact from the manufacturing slowdown on the labour market comes before a significant rebound in industrial activity. As a consequence, the bottoming out phase could still last until the summer’.

Any dovishness from the ECB would weaken the EUR/GBP exchange rate this afternoon, however, as Euro traders would become increasingly concerned for the economic outlook for Eurozone in 2020.

USD/EUR Exchange Rate Holds Steady on Downbeat US Economic Data

The US Dollar (USD) failed to gain against the Euro (EUR) following yesterday’s disappointing US Chicago Federal National Activity Index for December, which fell unexpectedly from 0.41 to -0.35.

The report showed that overall US economic activity has deteriorated last month, leaving US markets feeling jittery as it should have increased on increased consumer spending during the Christmas holidays.

Jim O’Sullivan, a Forecast at Market Watch, was upbeat in his analysis, commenting:

‘We don’t expect anxiety about trade to suddenly disappear, while domestic political uncertainty looks poised to rise. We’re now down to 2.5% to 3%. I’m looking for faster growth: I think we’re going to get 3% this year. The trade deals will help, the Fed changed policy — that was very, very important.’

Today will see the release of US labour reports for January. Any uptick in employment, or an easing off of unemployment, would prove USD-positive as the American economy shows signs of improvement early in the year.

EUR/USD Outlook: Could Weak US PMI Figures Weaken the US Dollar?

Euro (EUR) investors will be awaiting tomorrow’s release of January’s flash Eurozone Markit Composite PMI figure. The report is expected to show an increase from 50.9 to 51.2, an improvement which could provide some uplift for the single currency.

Tomorrow will also see the publication of Germany’s Markit Manufacturing PMI for January, which is expected to remain in contraction territory at 44.5. As a result, we could see some of EUR’s gains tempered by concerns over the Eurozone’s powerhouse economy’s performance.

US Dollar (USD) traders will be awaiting tomorrow’s release of January’s flash US Markit PMI Composite figure, which is expected to ease from 52.7 to 52.5. Any dovish commentary on the report, however, would prove USD-negative.