- Euro US Dollar Exchange Rate Below 1.12 on Wednesday – Needs supportive data to advance
- US Dollar Weakens as Risk-Demand Surges – Markets perceive debate-win for ‘status quo’ Clinton
- US Consumer Confidence Impresses – But new Markit forecast offers mixed US outlook
- Forecast: EUR USD Could Fall if Risk-Rally Ends – Presidential jitters could return
Euro US Dollar Exchange Rate Falls Below Week’s Opening Levels as USD Strengthens
The Euro US Dollar exchange rate slipped even further from its weekly highs on Wednesday, losing value as markets returned to the ‘safe-haven’ US Dollar following Tuesday’s risk-correlated rally.
Deutsche Bank concerns continued to weigh on the Euro throughout Wednesday’s session as markets speculated on the possibility of a German government rescue plan for the bank – only for the government to deny that any plans were being made.
However, the Euro’s selloff had cooled considerably since Tuesday amid analyst comments that panic over the Deutsche Bank had been overblown.
The US Dollar, on the other hand, was able to make a solid recovery against most of its major rivals on Wednesday afternoon as risk-sentiment dimmed.
The day’s US data, including preliminary August durable goods orders, may also have offered the ‘Greenback’ some support. Durable goods orders were expected to have contracted by -1.5%, but the figure instead printed a stagnant 0.0%.
(Previously updated 16:58 BST 27/09/2016)
Euro US Dollar Exchange Rate Gives Up Highs on Deutsche Bank Concerns
The Euro US Dollar exchange rate plunged to below the week’s opening levels on Tuesday afternoon despite the pair’s flat trade earlier in the day, as markets sold off the Euro amid concerns on Germany’s perceived Deutsche Bank crisis.
As one of the biggest banks in Germany, news that the bank had been fined US$14bn in the US has caused growing concern about the bank’s financial health. Speculation that this could even cause harm to the shared currency weighed on Tuesday’s Euro trade.
The US Dollar may also have been strengthened slightly by Tuesday afternoon’s US datasets. US consumer confidence jumped from 101.8 to 104.1 in September, beating forecasts of a drop to 99 and offsetting concerns that consumers were already getting US Presidential election jitters ahead of November.
Markit’s preliminary US Services PMI for September also beat expectations, improving from 51 to 51.9 and bringing the preliminary Composite score up to 52.
However, the US Dollar’s advances were limited by Markit’s accompanying forecast. Comments from Markit Chief Economist Chris Williamson indicated that the US’ economic outlook for Q3 2016 is generally slow and subdued. In the report, he projects slow 1% growth for Q3’s year-on-year growth.
(Published 12:28 BST 27/09/2016)
The Euro US Dollar exchange rate trended a lot more flatly after advancing on Monday, as the Euro’s data-related support waned. While the IFO’s German business sentiment report impressed investors, it was not enough to carry an extended Euro rally.
EUR USD has only made a slight advance since the week’s opening levels of 1.1225, briefly hitting a weekly high of 1.1273 on Monday – its highest level in over two weeks. The pair struggled to hold this high however, and on Tuesday morning was trending in the region of 1.1242.
Euro (EUR) Enjoys Limited Boost after Monday IFO Report
While the Euro to US Dollar exchange rate has trended higher since markets opened this week, demand for the shared currency has been limited and much of its strength against the ‘Greenback’ has been due to mixed Dollar sentiment.
The Euro was given a sturdy boost on Monday morning as the IFO’s September German business confidence report impressed investors. Business climate improved from 106.2 to 109.5, current assessment gained from 112.8 to 114.7 and expectations jumped up to 104.5 from 100.1.
With German businesses expecting a solid economic autumn period, sentiment for the Euro improved slightly. However, a lack of optimism in the tone of European Central Bank (ECB) President Mario Draghi’s Monday speech may have hindered demand for the single currency.
‘Mario Draghi described the UK as an important trading partner for the single currency area as he said Britain’s “destiny” would also impact the 19-nation bloc.
… he said the medium and longer term consequences of the UK’s decision to leave the EU were “much more difficult to foresee” and would “depend on the policies undertaken in the UK and the Euro area”.’
These comments among reminders that the ECB was prepared to help the Eurozone’s economy in any way it could (seen as hints towards further monetary easing to some analysts) weighed on Euro demand on Tuesday.
US Dollar (USD) Limp on Risk-Correlated Selloff
The US Dollar has had a rough few weeks, and has continued to trend relatively low this week as markets become increasingly anxious about November’s US Presidential election.
After months and months of Presidential campaigning and racing, the election is now under six weeks away and Monday night saw the first TV debate of each party’s Presidential nominees.
With Presidential hopefuls Hillary Clinton and Donald Trump offering very different prospects on the US economy, the election is a source of great market uncertainty.
Monday night saw the first Presidential debate, with Democrat Clinton and Republican Trump going head to head. In the aftermath of the debate, markets had worked up an appetite for riskier investments, according to the Financial Times;
‘The foreign exchange market’s conclusion: that Hillary Clinton put on a more convincing show than the Republican nominee, that the US relationship with its immediate neighbours will remain where it is, and that the Yen (JPY) will not, for now at least, be called upon to perform its traditional role as a safe haven currency in times of profound global uncertainty.’
Amid increasing hopes that US markets and economic movements will maintain the current ‘status quo’ following the election, on higher bets of a Clinton win, investors felt safer indulging in riskier assets.
This caused the ‘safe-haven’ US Dollar to weaken slightly as risky-rivals like the Canadian Dollar advanced. However, ‘Greenback’ sentiment remained solid overall.
Euro US Dollar Exchange Rate Forecast: Key Datasets Could Bolster EUR USD
Until the next key event in the US Presidential race, markets will likely continue to operate as normal on the US Dollar, meaning that its current weakness will only remain so long as markets seek out risk-correlated assets.
Positive data could give the US Dollar a boost, but underwhelming data could allow Euro US Dollar to advance and edge nearer its best post-Referendum levels.
Tuesday afternoon sees the publication of the US’ September consumer confidence report, which is expected to have slipped from 101.1 to 98.8 amid anxiety ahead of November’s election. If this comes in as low as expected (or lower), the ‘Greenback’ could weaken.
Wednesday’s session will also be vital for US markets. While the Eurozone will see the publication of GfK’s German October consumer confidence survey, US data includes preliminary August durable goods orders and a speech from Federal Reserve Chairwoman Janet Yellen.
At the time of writing, the Euro US Dollar exchange rate trended in the region of 1.1245, while the US Dollar Euro exchange rate traded at around 0.8888.