Euro to US Dollar Exchange Rate: EUR/USD Slips despite US Trade Jitters
The past week’s Eurozone data has done little to support the Euro to US Dollar (EUR/USD) exchange rate, and hopes for the US and China to work out trade differences with negotiations have benefitted the US Dollar (USD) more.
Since opening this week at the level of 1.2324, EUR/USD has spent most of the week tumbling and on Friday the pair hit a new low of 1.2220.
This was the pair’s lowest level since February and EUR/USD is on track to see its second consecutive week of losses thanks to US Dollar strength.
The US Dollar has rebounded from lows this week in a general move higher, but has also been supported by speculation that both the US and China would rather discuss trade issues than cause a ‘trade war’.
While US Dollar investors are concerned about the possibility of the US sparking a global ‘trade war’ with its increasingly protectionist trade tariff plans, this news has weighed on the Euro (EUR) too.
Euro (EUR) Exchange Rates Weighed as ‘Trade War’ Fears Impact Eurozone
Market anxiety about the possibility of the US sparking a ‘trade war’ has already had an impact on the economy, according to European Central Bank (ECB) executive board member Benoit Coeure.
Coeure stated on Friday that concerns of a trade war were causing borrowing costs to rise and share prices to fall.
Coeure said in his speech in Italy;
‘Falls in equity prices in response to the US announcement to impose a tariff on steel and aluminium, and prevailing uncertainty on the scope of any retaliatory measures, have already contributed to tighter financial conditions,’
He said that the US would be worst-hit by the plans but the Eurozone would also take a hit to growth.
The Euro has been weighed down by Eurozone data in the past week as well. The Eurozone’s March inflation projections met expectations, but revealed that core inflation remained subdued at just 1%.
Eurozone PMIs fell short of expectations in March, indicating that the strong economic growth the bloc had seen since last year was slowing further than expected.
US Dollar (USD) Exchange Rates Sturdy Ahead of Key Non-Farm Payroll Report
Despite some underwhelming US data published earlier in the week, the US Dollar has been rebounding from its lows for most of the week.
ISM’s manufacturing and non-manufacturing PMIs both fell short of expectations in March, but they still came in with strong figures of 59.3 and 58.8 respectively so had little negative impact on the US Dollar.
US Dollar investors have been buying the currency back from its lows following weeks of poor performance. Hopes that the US and China are both willing to do what it takes to avoid a ‘trade war’ have also boosted the US Dollar from its lows.
ADP’s March employment report was better than expected, which bolstered market hopes that Friday’s highly anticipated US Non-Farm Payroll report could beat expectations too.
Euro to US Dollar (EUR/USD) Forecast: US Non-Farm Payrolls and Eurozone Inflation Ahead
Friday’s American session will see the publication of March’s highly anticipated US Non-Farm Payroll results.
As analysts expect NFP growth to have slowed last month, better than expected stats or strong US wage results have the potential to boost Federal Reserve interest rate hike bets, and the US Dollar outlook.
The US NFP results are likely to cause some late-week movement in the Euro to US Dollar (EUR/USD) exchange rate, but the pair is still on track to end this week lower unless the data is surprisingly disappointing.
Market anxiety about the possibility of a ‘trade war’ is likely to continue to cause volatility in EUR/USD in the coming week, too.
But next week’s major Consumer Price Index (CPI) stats could cause a shift in the direction of EUR/USD trade.
US inflation results from March will be published next Wednesday, alongside the latest Federal Reserve meeting minutes results.
Towards the end of next week, final March inflation figures from France and Germany will be published, which could influence European Central Bank (ECB) interest rate hike bets if they surprise investors.