Lower Confidence in the Eurozone Dampened Euro to US Dollar Exchange Rate Support
While demand for the US Dollar (USD) has been a little weaker this week, the Euro (EUR) has been unable to capitalise due to mixed Eurozone data and European Central Bank (ECB) speculation.
This has left the Euro to US Dollar (EUR/USD) exchange rate near the week’s opening levels.
EUR/USD put in a solid gain of around half a cent last week, climbing from 1.1601 to 1.1654. This week, EUR/USD briefly touched on a high of 1.1717 before falling back to the week’s opening levels.
At the time of writing on Wednesday, EUR/USD was trending near this week’s lowest level, 1.1627.
Its weakness was due to multiple factors weighing on Euro demand, such as Eurozone data and cautious comments from the European Central Bank.
However, the US Dollar has been pressured by trade jitters and signs of weakness in US economic activity, leaving the Euro to US Dollar exchange rate fluctuating instead.
Euro (EUR) Exchange Rates Struggle to Hold as ECB Hints that Inflation Could Remain Weak
Earlier in the week, the Euro found support in the form of some better-than-expected German business confidence stats.
However, signs that Eurozone confidence is weaker than expected in other areas weighed on the shared currency during Wednesday trade.
Wednesday saw the publication of France’s June consumer confidence survey results, which indicated that households were surprisingly less confident than the previous month.
Analysts had expected confidence to remain at 100, but the figure unexpectedly slowed from a revised 99 to 97.
Euro trade was also dented by comments from the European Central Bank, suggesting that the surge the Euro saw in the past year could keep pressure on Eurozone inflation well into next year. The bank said:
‘The appreciation from mid-2017 might still be relevant for some quarters to come,
The exchange rate pass-through may be difficult to detect if it is offset by a confluence of other factors, including increased pricing power for firms.’
US Dollar (USD) Exchange Rates Rebound from Lows Following Days of Weakness
For most of the week so far, the US Dollar has been sold due to concerns about how US trade protectionism could negatively impact the US economy.
News that US motorcycle company Harley-Davidson was moving production out of the US in order to avoid trade tariffs made investors anxious that there was a real chance of the US economy being negatively affected by the US government’s trade stances.
US President Donald Trump has shown no signs of backing away from his protectionist stances and has continued to ramp up plans for tariffs against nations who retaliate with tariffs of their own.
On top of this, recent US data is showing signs that businesses and economic activity are being dampened by trade jitters too. Tuesday’s CB consumer confidence data unexpectedly weakened to 126.4.
However, with the US economic outlook still generally solid and investors betting on another two Federal Reserve interest rate hikes this year, the US Dollar has been supported regardless. Its gains remain limited though.
Euro to US Dollar (EUR/USD) Forecast: Major Ecostats Due in the Coming Sessions
Thursday and Friday could be highly influential for the Euro to US Dollar (EUR/USD) exchange rate, with slews of key Eurozone and US data due throughout.
After days of trending on trade jitters and consumer confidence figures, the key inflation and growth figures due towards the end of the week could have a notable impact on Central Bank speculation and currency trade.
Thursday could be the most influential session this week for EUR/USD.
German and Eurozone consumer and business confidence figures will be published in the morning, followed by German inflation figures and US growth stats later in the day.
If there are any signs that German inflation is performing better than expected, it could make investors less concerned about Eurozone inflation and boost European Central Bank (ECB) interest rate hike bets.
The US growth data is unlikely to give the US Dollar much of a boost, but if it comes in well short of expectations it could dampen US growth expectations and Fed rate hike bets.
This would help the Euro to US Dollar (EUR/USD) exchange rate to advance, but investors may be eager to await Friday’s Eurozone and US inflation data before making big moves.