EUR/USD Drops Further on Surprisingly High University of Michigan Confidence
- Eurozone Industrial Production Poor – Undermines Euro’s footing
- US Monthly Budget Statement Down – Figure drops more than expected in April
- Update: Eurozone GDP Fails to Impress – Eurozone GDP down, but up in Germany
- Update: US Jobless Claims Disappoint – Claims up, but ‘Greenback’ strong regardless
- Update: Fed Policymakers Hawkish– Fed’s George claims current rates are too low
The Euro to US Dollar exchange rate looks to end the week’s session near a two-week low of 1.1283 after a surprisingly bullish confidence report from the University of Michigan inspired the already strengthening US Dollar.
Despite expectations that May’s confidence report would only gain from 89.0 to 89.5, it instead leapt up to a high score of 95.8.
Other strong US data from throughout Friday boosted ‘Greenback’ sentiment, including advance retail sales which beat out forecasts of 0.8% by improving from -0.4% to 1.3%.
Business inventories also escaped negative territory of -0.1% by surpassing forecasts of 0.2% to print at 0.4%
Overall, the Euro to US Dollar exchange rate lost over -100 pips throughout the past week, with its biggest drop of around -0.7% on Friday.
EUR/USD Plummets as Fed Policymakers Adopt Surprisingly Hawkish Tone
The Euro to US Dollar exchange rate looks set to end the week’s session below opening levels as the ‘Greenback’ strengthened considerably on surprisingly hawkish Federal Reserve policymakers. This movement was solid despite news that US jobless claims had worsened from 2.121m to 2.161m.
According to CNBC, Kansis City Fed President Esther George argued that while gradual rate hikes are ideal, the US’ current interest rate level is too low to efficiently support the US economy.
The statement, alongside other hawkish inclinations, significantly boosted Fed rate hike bets and US Dollar appeal on Thursday, while mixed Eurozone Gross Domestic Product (GDP) released on Friday did little to help the Euro.
German GDP printed above expectations in all prints, but general Eurozone GDP slowed, leaving the Euro uninspired as the week drew to an end.
The Euro to US Dollar (EUR/USD) exchange rate has largely fluctuated this week as both the Eurozone and the US have seen mixed data releases, with the most recent being the latest US budget statement.
EUR/USD fell from a new weekly high of 1.1441 on Wednesday and has since lost around -30 pips. At the time of writing, the pair was trending in the region of 1.1405.
Euro (EUR) Remains Uninspired after Quiet Wednesday
The Euro slipped on Wednesday after recovering against a weak US Dollar as investors of the shared currency lacked any key prints to motivate Euro movement.
The last considerable set of Eurozone data was a mixed pack of German industrial production and trade balance reports. As industrial production dropped much more-than-expected while the trade surpluses expanded beyond expectations, the Euro’s reactions were muted.
Wednesday’s Eurozone news included Portugal’s Consumer Price Index (CPI), which grew from 0.4% to 0.5% year-on-year, and Portugal’s Q1 unemployment rate, which worsened from 12.2% to 12.4%.
This morning’s German wholesale price index scored a steady 0.3% month-on-month, with year-on-year contraction worsening from -2.6% to -2.7%.
Unfortunately, the Euro’s defences were hit by news that Eurozone industrial production had dropped more-than-expected.
Production was projected to remain stagnant on February’s -0.8% but instead fell by a further -0.8% in March. The year-on-year print also disappointed estimates of accelerating to 1.1% by slipping from 0.8% to 0.2%.
US Dollar (USD) Advance Slowed by Poor Budget Statement
The US Dollar attempted a recovery during Wednesday’s session as investors reacted to the EUR/USD exchange rate once more climbing above 1.1440, the highest point since last week’s half-year-high of 1.1592.
However, its recovery was muted by largely negative US data released on Wednesday, including crude oil inventories and April’s monthly budget statement.
After the previous crude oil figure came in at a high 2784k, analysts expected a smaller gain of 750k in the May 6th report. The report came in with a figure of -3410k, a score that also saw oil prices rising as oil demand looked to outstrip supply.
The crude oil report was followed later on Wednesday evening by the monthly budget statement, which was expected to drop from $156.7b in March to $110.0b in April. The sum dropped further than anticipated, coming in at $106.5b.
While news was largely underwhelming, the ‘Greenback’ recovery may have been slightly enabled by MBA’s mortgage applications report, which showed an improvement from -3.4% to 0.4%.
Euro to US Dollar (EUR/USD) Exchange Rate Forecast: Jobless Claims and Fed Speakers Today
The Euro could be set to trend lower throughout Thursday’s session as a result of the Eurozone’s industrial production report, which will likely influence the Euro’s direction until Friday’s key session.
Friday will see the release of a slew of Eurozone Gross Domestic Product (GDP) reports for Q1 2016, including German GDP as well as Germany’s final April Consumer Price Index (CPI) scores.
Could the US Dollar be set to dip again? It certainly could if yesterday’s disappointing news is followed up by underwhelming data and dovish Federal Reserve policymaker commentary throughout Thursday.
US jobless claim reports are due for release on Thursday afternoon, with continuing claims expected to drop slightly from 2121k to 2120k. If the figure fails to drop and reflects last week’s disappointing unemployment rate, the ‘Greenback’ could struggle – especially if Federal Reserve policymakers Mester, Rosengren and George adopt dovish tones when they speak later in the day.
Highly anticipated advance retail sales and University of Michigan confidence reports will be released for the US on Friday, which could boost the ‘Buck’ if Thursday’s data fails.
The Euro to US Dollar (EUR/USD) exchange rate currently trades at around 1.1405, while the US Dollar to Euro (USD/EUR) exchange rate trends within the region of 0.8765.