Euro to US Dollar Exchange Rate Slides as Eurozone Manufacturing Contraction Helps USD Rebound
Despite a lack of particularly strong Eurozone data this week, the Euro to US Dollar (EUR/USD) exchange rate has been trending higher due to broad weakness in the US Dollar (USD). The US Dollar rebounded slightly today which has pushed the pair back from its highs.
Since opening this week at the level 1.1176, EUR/USD has been trending with an upside bias. EUR/USD briefly touched on a high of 1.1242 yesterday during quiet New Year’s Day trade, which was one of the best levels for the pair since August 2019.
EUR/USD has since slipped back from its highs though, and is trending just above the week’s opening levels in the region of 1.1186 at the time of writing.
Demand for the Euro (EUR) is being weighed by concerning Eurozone data while the US Dollar rebounds from days of losses.
Euro (EUR) Exchange Rates Lack Drive as Eurozone Manufacturing Remains Slow
Earlier in the week, the Euro saw a strong surge in demand due to broad weakness in the US Dollar, its biggest rival.
However, the Euro has been lacking in solid support. Amid a rebound in US Dollar demand today, the Euro tumbled, and the day’s latest Eurozone ecostats did little to support the shared currency.
While Markit’s final December Eurozone manufacturing PMIs beat projections in Germany and the Eurozone overall, the data still showed a concerning monthly contraction in manufacturing activity.
German manufacturing ultimately contracted at a highly concerning 43.7, and the Eurozone contracted at 46.3 overall.
Only #Eurozone #PMI countries to see #manufacturing growth in December according to #PMI were #Greece (53.9) & #France (50.4) – both slower. Was deeper contraction in #Germany (43.7) #Italy (46.2) #Netherlands (48.3) #Spain (47.4) #Ireland (49.5). #Austria drop stable at 46.0 https://t.co/hzQsnMxO67
— Howard Archer (@HowardArcherUK) January 2, 2020
Analysts from Markit said that while there were signs of recovery, they were limited and potentially still far off.
US Dollar (USD) Exchange Rate Rebounds Following Notable December Losses
After performing strongly for much of 2019, the US Dollar saw broad weakness towards the end of the year.
Investors sold the US Dollar in December, as the global growth and trade outlooks showed more signs of recovery and made investors less eager to hold into the US Dollar as a safe haven.
As the US Dollar continued to tumble before the turn of the year at the beginning of the week, today’s rebound in the US currency has been more about adjusting from those losses.
According to Lee Hardman, Senior FX Strategist at MUFG:
‘There’s nothing fundamental…at the end of last year the Dollar sold off quite sharply so we are seeing an easing in some of the dollar selling pressure,
The liquidity squeeze didn’t materialise so that’s contributing to stability in broader financial markets…But the Dollar story has been turning negative in recent months, partly because of action taken by the Fed to ease dollar liquidity,’
Euro to US Dollar (EUR/USD) Exchange Rate Could Shift Directions Again on Tomorrow’s Data
The Euro to US Dollar (EUR/USD) exchange rate has been tumbling from its highs today, but could still advance again before markets close for the week depending on how tomorrow’s data unfolds.
Tomorrow will be the biggest session of the week for Eurozone and US data, starting the year off with some typically influential ecostats.
Euro investors will be anticipating the day’s German unemployment and inflation stats, as well as French inflation. If inflation beats forecasts it could douse European Central Bank (ECB) easing speculation and boost the Euro.
US Dollar investors on the other hand are eagerly awaiting influential US data that could drive Federal Reserve speculation.
Key US manufacturing PMI data from ISM, as well as the Federal Reserve’s latest meeting minutes, could cause Euro to US Dollar (EUR/USD) exchange rate movement tomorrow before markets close if they surprise investors.