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Euro US Dollar Exchange Rate Down on Weak Eurozone Data, Lingering Safe-Haven Demand

  • Euro US Dollar Exchange Rate Falls – Ecostats show extent of pre-Brexit pressure on Euro economies.
  • Eurozone Retail Falls into Contraction – Brexit uncertainty keeps consumers from reaching for their wallets.
  • US Services Show Heartening Boost – US non-manufacturing PMI shows incredible rise in pre-Brexit June
  • EUR/USD Forecast: Friday’s NFP Report Looks to Cause Further Depreciation as Euro Uncertainty Lingers

The Euro US Dollar exchange rate trended narrowly for the most part during yesterday’s session, after an initial drop of over half a cent thanks to disappointing Eurozone data.

While the Euro’s performance against the US Dollar was fairly limp, the common currency was able to remain trending in a stronger position against a struggling Pound.

Yesterday saw the publication of a series of disappointing ecostats for Europe, including a Markit Eurozone retail PMI which showed the sector falling into contraction, along with Germany factory orders remaining in decline.

The US trade balance slipped further into the red, according to reports released Wednesday afternoon, and both general factory orders and durable goods orders posted a marked decline. However, the US non-manufacturing composite PMI showed a massive increase from 52.9 to 56.5 in a sign that the US services sector boomed before the UK went to vote on its EU membership.

The Euro US Dollar exchange rate traded at 1.1045 towards the end of yesterday’s session after falling almost 0.20%.

Euro (EUR) Slides as Eurozone Retail Falls into Contraction at 48.5

It has been a tumultuous week for the common currency as every ecostat released thus far has posted a decline bar just two: Tuesday’s Eurozone retail sales figures and German factory orders.

Expected to step out of contraction, German factory orders missed the hopeful 0.9% target and instead remained in decline at -0.2%. The construction PMI from Germany saw a decline from 52.7 to 50.4 and also the German retail PMI saw a hefty decrease from 54 to 51.6. Finally, the Eurozone retail showed the sector in contraction as it printed at 48.5, down from 50.6.

All these results come from the pre-Brexit period in June where uncertainty was mounting on the run up to the vote, as it was expected to see some form of downturn in the figures the Euro’s movement was tempered.

European Central Bank President Mario Draghi spoke in Frankfurt yesterday but failed to excite much currency movement with his fairly impotent speech.

A recent abatement in safe-haven demand for currencies has kept Euro support fairly low and disheartening ecostats have failed to make for that fact.

US Dollar (USD) Fails to Make Significant Gains on back of Favourable non-Manufacturing PMI

The US non-manufacturing (services) PMI printed at a pleasing 56.5 yesterday afternoon, placing further downward pressure on the Euro US Dollar pairing.

Previously, US ecostats had been disappointing with both factory and durable goods orders remaining in decline during May.

The US Dollar has lost some support lately as the chances of a near-term US Federal reserve rate hike continue to look unlikely, with discussions about a rate cut starting to appear. Previous safe-haven demand was taking the US Dollar towards overvalued levels, which caused concern for the US central bank. However, recent performance has lead analysts to return to expect at least one rate hike will be enacted by the end of the year.

Optimistic comments from researchers regarding this week’s Non-Farm Payrolls (NFP) figures could lend the US Dollar some support. Researchers from Westpac state:

‘Come June, a bounce is anticipated, albeit not quite back to the prior-period averages. While the Verizon strike has ended, job creation has obviously slowed. A gain of around 190k seems most probable. Upward revisions are possible though’

Euro US Dollar Forecast: EUR USD Volatility Expected on Friday’s NFP Data Release

The largest impactor for the Euro US Dollar exchange rate this week will be Friday’s release of NFP data for the US. Previously, a weak NFP print dashed hopes of a June fed rate hike so the report certainly has potential for movement.

However there is a small group of US ecostats set for release later today. ADP employment change, initial and continuing jobless claims as well as crude oil inventories are to be released. Oil could rally if the US shows a drop in supply and the US Dollar could expect a small increase if the employment data prints favourably, but it will be Friday’s data that should effect any large movement.

From Europe, the ECB policy meeting minutes are to be released later today. Analysts will study the rhetoric closely to discern anything that hints at sentiment change.

The German trade balance is set for release Friday morning. Being the Eurozone’s largest economy, changes in Germany’s economic conditions tend to have a knock-on effect for the rest of Europe.

Ultimately, however, it will be down to the US NFP report mostly to elicit major movement for the Euro US Dollar exchange rate as European reports are fairly thin on the ground.