Euro to US Dollar Exchange Rate Outlook Remains Bearish as Eurozone Outlook Remains Weak
This week’s data has not been enough to improve the Eurozone’s concerning economic outlook, leaving the Euro to US Dollar (EUR/USD) exchange rate nursing losses after hitting its worst levels in over two years this morning.
Concerns about trade, manufacturing, and how they continue to damage Germany’s economy, left EUR/USD tumbling from 1.1019 to 1.0939 last week.
EUR/USD has only fallen further this week so far as well, touching on a low of 1.0881 this morning which was also the pair’s worst level since April 2017. At the time of writing, EUR/USD had edged slightly higher and trended in the region of 1.0900.
With German recession fears still pressuring the Euro (EUR), the shared currency is unlikely to mount much of a recovery unless upcoming Eurozone data is notably impressive.
Euro (EUR) Exchange Rates Continue to be Hit by German Trade and Manufacturing Fears
The Euro remains one of the market’s less appealing major currencies this week, as concerns that Germany’s economy may be in recession persist and the latest Eurozone data has given investors little to be more optimistic about.
Exacerbated by the ongoing US-China trade war, German trade and manufacturing have slumped this year. This has proven to be a significant drag on the overall Eurozone, as Germany is the bloc’s biggest economy.
Following yesterday’s disappointing German retail sales and inflation rate data, today’s German manufacturing PMI did beat forecasts – but still printed a worryingly deep contraction of 41.7.
According to Chris Williamson, Chief Economist at Markit:
‘The health of the Eurozone manufacturing sector went from bad to worse in September, with the PMI survey indicating the steepest downturn for nearly seven years and sending increasingly grim signals for the fourth quarter.’
US Dollar (USD) Exchange Rates Benefit from Safe Haven Demand and Rival Weakness
With its rival the Euro under pressure from continued growth slowdown fears, the US Dollar (USD) has found it even easier to advance due to the negative correlation the currencies share.
The US Dollar is a safe haven currency that often benefits from global market uncertainty.
Though there have been signs of slowdown in the US economy as well, they have not been significant enough to dampen the US Dollar’s safe haven appeal amid ongoing slowdown fears in other major economies.
Kit Juckes, Strategist from Societe Generale, had this to say about the US Dollar’s strength:
‘On we go with the Dollar,
It is the pick of the major economies and I don’t think anything is going to change (for the Dollar) until the economy slows.
If you are very sensitive to global trade and sensitive to manufacturing you are having a very tough time of it at the moment, there is no doubt about it.’
Euro to US Dollar (EUR/USD) Exchange Rate May Find Support if Upcoming Eurozone Data Impresses
Much of the US Dollar’s recent strength has been due to weakness in rivals, as well as global growth jitters bolstering safe haven demand, rather than any strong support from US data.
As a result, the Euro to US Dollar (EUR/USD) exchange rate is more likely to rebound if investors are given reason to believe that the Eurozone outlook is improving.
This leaves Thursday’s upcoming Eurozone services PMI data and retail sales stats as some of the most influential news due in the rest of the week.
If these stats impress investors, the Euro could rebound more strongly and take some ground back from the US Dollar.
Still, the US Dollar could also be driven by upcoming major US data later in the week.
US non-manufacturing PMI figures are due on Thursday, and the US Non-Farm Payroll report, which the Federal Reserve pays close attention to, is due for publication on Friday.