Euro to US Dollar Exchange Rate Struggles to Recover as Global Growth Outlook Weighs
Amid a lack of fresh support for the Euro (EUR) this week so far, investors had little reason to buy the Euro to US Dollar (EUR/USD) exchange rate last week. The US Dollar (USD) has remained appealing as a safe haven currency.
A strong US Dollar (USD) rebound dominated market news last week, following weeks of poor performance for the US currency since the beginning of the year.
EUR/USD opened last week at the level of 1.1469 and shed just over a cent throughout the week, closing at the level of 1.1365. EUR/USD briefly edged higher when markets opened this week, but at the time of writing trended close to the week’s opening levels.
Global uncertainties about slowing growth and how political tensions may further weaken global growth have made investors more eager to hold onto safe haven currencies like the US Dollar.
Euro (EUR) Exchange Rates Remain Unappealing amid Concerns of Slowing Eurozone Growth
The only Eurozone data worthy of note on Monday was Germany’s December Producer Price Index (PPI) results from December, but even these didn’t give investors any reason to buy the recently unappealing Euro.
German PPI came in with a worse-than-expected contraction of -0.4% month-on-month, and the yearly figure fell to 2.7% rather than the expected 2.9%.
With recent Eurozone data either meeting expectations or falling below them, concerns persist that the Eurozone’s economic strength is weakening at a worse pace than expected.
These concerns were also highlighted by the International Monetary Fund (IMF) on Monday. The group predicts Eurozone Gross Domestic Product (GDP) growth to reach 1.8% this year and just 1.6% next year.
Expectations for slower growth are making investors doubt the possibility of Eurozone interest rate hikes from the European Central Bank (ECB) and this is weighing on the Euro.
US Dollar (USD) Exchange Rates Benefits from Market’s Safe Haven Demand
The US Dollar is a popular safe haven currency, making it appealing in times of global uncertainty.
While the US Dollar has plummeted from its 2018 highs since late-December and only finally saw a rebound last week, the currency was able to hold its ground on last week’s rebound thanks to resilient demand for safe havens.
Further signs of slowing global growth, as well as uncertainties about US trade tensions with China and broad uncertainties surrounding Brexit and the future of Britain’s economy all left investors hesitant to sell the US Dollar.
Analysts have recently expressed concern that the chances of the US reaching agreements with China on major issues like IP misuse are unlikely to happen any time soon.
This prevented the Euro to US Dollar exchange rate from climbing throughout the day.
Movement in the US Dollar was fairly damp overall though, as US markets were closed to observe the Martin Luther King Jr. Day public holiday.
Euro to US Dollar (EUR/USD) Exchange Rate Investors Anticipate Eurozone Confidence Stats
As Eurozone economic data continued to indicate the Eurozone economy is slowing, upcoming data could make the Euro more appealing again if it impresses.
Tuesday will see the publication of ZEW’s German and Eurozone economic sentiment survey figures for January, which could help the Euro to US Dollar (EUR/USD) exchange rate to recover some of last week’s losses if they beat forecasts.
However, concerns about Eurozone economic activity would worsen if they disappoint and this would make it even more difficult for EUR/USD to recover some of its recent losses.
Tomorrow’s US data includes existing home sales stats from December, and as US markets will reopen tomorrow too there may be a continued reaction to the latest US-China trade speculation.
Of course, if there are optimistic US-China trade developments or speculations overnight market demand for safe haven currencies would likely dampen and EUR/USD may find it easier to recover.
Developments in US trade and political news could drive the Euro to US Dollar (EUR/USD) exchange rate for most of the week, but Eurozone inflation stats due later in the week will also prove highly influential.