- Euro US Dollar Exchange Rate Bolstered on Strong Commodities – US Dollar unattractive as risk-on market prevails.
- Euro Continues to Wrestle with Uncertainty – Ongoing Brexit deliberations and the mounting Italian bank crisis ward off investors.
- US Dollar Loses Favour to Risk-Correlated Currencies – Chinese demand for iron ore keeps commodity indexes healthy.
- EUR/USD Forecast for Movement on High-Impact US Data Releases.
The sustained lack of safe-haven demand has seen the Euro US Dollar exchange rate gradually appreciate over the last two sessions.
Rallying commodities have kept investors in favour of riskier high-yielding currencies such as the ‘Aussie’ and Canadian Dollar, limiting demand for the ‘Buck’.
However, mixed Eurozone data has kept demand for the common currency fairly muted and various issues adding to European uncertainty have continued to cloud matters such as the Italian banking crisis.
Before the end of Thursday’s session, the Euro US Dollar exchange rate traded at 1.1108 after lingering around the day’s opening levels.
Euro (EUR) Remains Strong on Falling US Dollar
The Euro experienced a small dip in value verses the US Dollar on Wednesday as Eurozone industrial production figures for May showed a marked decline. As this data was from the pre-Brexit period, we could expect to see an even worse print next month.
The common currency has enjoyed gains made on the back of the falling demand for the US Dollar, but the Euro’s upswing has been capped due to the ever increasing basket of post-Brexit Eurozone concerns.
Subdued growth in the currency bloc has been highlighted by a group of Eurozone finance ministers. Reports from the Eurogroup show they expect a significant decline in growth in 2017. Also worrying is the Economic and Financial Affairs Council’s plans to reprimand Spain and Portugal for breaching deficit tightening targets.
Downward pressure on the Euro was furthered by the ongoing Italian banking crisis. The banks are wrestling with over €360 billion worth of bad loans, a large majority of which have been written off as uncollectable. The Italian banking sector has struggled for at least two-decades and failed to recover substantially from the 2008 world banking crisis.
Now the Italian PM is eyeing up a tax-payer funded bailout for the banks to keep them from the brink of collapse, which goes against recently enacted EU banking guidelines.
US Dollar (USD) Fails to Attract Investors as Fed Rate Hikes Remain Far Off
Demand for the US Dollar is still decidedly muted amid expectations the Fed will refrain from hiking rates for the foreseeable future, despite some members of the central bank adopting a more hawkish rhetoric.
Rallying commodities and treasuries sliding into negative yields kept investor safe-haven demand firmly low. The ‘Buck’ fell further against every major, bar the New Zealand Dollar and Yen, over the course of yesterday’s session as the possibility of a near-term rate hike remains unlikely.
In turn, investors flocked to the higher yielding commodity-correlated currencies in an attempt to take advantage of the current circumstances. Fed rate hike bets remain subdued however, even after the stellar non-farm payrolls release last Friday and hinting of the likelihood of two rate hikes by the end of the year by Federal Reserve banker Patrick Harker.
Recent disappointing US data releases have done little to save the US Dollar from current lax demand.
High Impact US Data Releases Hold Potential for Euro US Dollar Exchange Rate Movement
Later today the US consumer price index will be released. If the figures stray further towards the approximate 2% target favoured by the Fed, there may be an increased chance of a rate hike in the near-median term.
Advanced retail sales and the University of Michigan’s confidence survey will both give insight on the current spending habits and mindset of US consumers. Any bullish sentiment exuded from the reports could offer the US Dollar some support over the session.
From the Eurozone, the European Central Bank’s (ECB) survey of professional forecasters holds definite potential to see the Euro move. Depending on the sentiment elicited by the report, the Euro could find support if the consensus appears hopeful.
Eurozone inflation data is also set for later this morning.
Ultimately it will be the high-impact US data set for later today that will enact any drastic movement on the Euro US Dollar exchange rate.