Euro US Dollar (EUR/USD) Exchange Rate Muted as US Markets Close for Thanksgiving
UPDATE: The Euro US Dollar (EUR/USD) exchange rate remained flat on Thursday following mixed Eurozone data, leaving the pairing trading at around $1.1005.
Annual German inflation edged up slightly in November, although remained below the European Central Bank’s target for the seventh consecutive month.
After a 0.9% increase last month, consumer prices rose by 1.2%, the highest rate since June.
Meanwhile, data showed Eurozone sentiment rebounded this month, thanks to an increase in service sector optimism.
However, the single currency was left under pressure as today’s data was mixed.
Commenting on this, ING’s Peter Vanden Houte wrote:
‘The latest batch of data gives the feeling that the economy is still in some kind of purgatory, with the jury still out as to whether the next phase will be heaven or hell. The good news is that the Eurozone economy doesn’t seem to be weakening any further. But that doesn’t mean that a strong upturn is in the offing, certainly not in the short-term.’
Meanwhile, the Dollar remained quiet as markets closed for Thanksgiving.
Euro US Dollar (EUR/USD) Exchange Rate Muted as Eurozone Business Confidence at Six-Year Low
The Euro US Dollar (EUR/USD) exchange rate remained muted on Thursday as US markets closed for Thanksgiving, trading at around $1.1010.
The pairing remained flat as Eurozone business confidence slumped to -0.23 in November.
This was the third consecutive month that confidence fell into contraction. Added to this, the figure was the joint lowest since July 2013.
Despite the slight rise in the bloc’s economic sentiment indicator to a higher-than-forecast 101.3, this could do little to buoy the single currency.
US Dollar (USD) Muted as Trump Endorses Hong Kong
The US Dollar was left under pressure on Thursday after President Donald Trump formally endorsed the protestors in Hong Kong.
Support for the anti-government protests has been seen by markets as a way to potentially derail any progress in US-China trade negotiations seen this week.
Despite objections from Beijing, the US President signed legislation that supported protestors on Wednesday.
The bill requires the State Department to certify that Hong Kong retains enough autonomy to justify favourable US trading terms. Added to this, it also threatens sanctions for human rights abuses.
China’s foreign ministry responded and said it opposed the law, threatening to take countermeasures, sparking an upswing in tensions.
The ministry also noted that US attempts to interfere in Hong Kong are ‘doomed to fail’.
Commenting on this, Westpac FX analyst Imre Speizer noted:
‘It’s displeasing to the Chinese side. And we are getting close to the point when this deal needs to get signed […] the market’s reacting to it as though it might put a snag in the works.’
US Economic Growth Unexpectedly Picks Up
On Wednesday, data revealed that US economic growth unexpectedly picked up in the third quarter.
Added to this, signs the business investment downturn is easing, which provided USD with support.
Strength in the US labour market also provided an upswing of support as Americans filing jobless claims fell last week after two consecutive weeks remaining at a five-month high.
The strength in the labour market should support consumer spending which data suggests is slowing.
These recent reports are painting a more upbeat image of the US economy, which is currently in a record 11th year of expansion.
However, analysts believe it is unlikely growth will reach President Trump’s 3% target.
Commenting on this, MUFG’s chief economist, Chris Rupkey said:
‘There isn’t a lot of oomph here to power the economy forward anywhere near the Trump economics team’s prediction of 3%.
‘There are some green shoots, however, that bode well for the economy in the months ahead.’
Euro US Dollar Outlook: Will Weak German Inflation Weigh on EUR?
This afternoon, the Euro (EUR) could slump against the US Dollar (USD) following the release of Germany’s inflation data.
If flash German inflation slumps more than expected between September and November, it will leave the single currency under pressure.
Meanwhile, it is likely the ‘Greenback’ will react to further reports on US-China negotiations.
If there are further signs the two countries are closer to signing a ‘phase one’ trade agreement, the Euro US Dollar (EUR/USD) exchange rate is likely to slump.