Euro to US Dollar Exchange Rate Slips Back from Highs but Trade Jitters Persist
Following yesterday’s jump on the back of fresh US-China trade fears, the Euro to US Dollar (EUR/USD) exchange rate fell back from its highs today. This was despite today’s German data beating expectations, as the Eurozone outlook remained uncertain.
Due to central bank news and Eurozone economic concerns, EUR/USD fell from 1.1133 to 1.1108 last week but was able to hold above the week’s worst level of 1.1030, which was also the worst EUR/USD level in over two years.
This week, EUR/USD has already regained all of those losses and more. Overnight, EUR/USD touched on a high of 1.1246, which was the best level for the pair in over half a month, but at the time of writing the pair trended closer to the level of 1.1200.
The Euro (EUR) and US Dollar (USD) outlooks are both pressured by renewed global trade jitters, but for now investors are anticipating key German data due in the coming sessions.
Euro (EUR) Exchange Rates Fail to Hold Best Levels despite Stronger German Factory Orders
Germany’s June factory orders report was published today, with the figure coming in at 2.5% rather than the predicted 0.5%. It rebounded strongly from May’s concerning contraction of -2.0%, though this was slightly better than the previously reported -2.2%
The Euro was unable to benefit much from the stronger factory orders data though, due to various factors diminishing the impressiveness of the results.
The rebound in German factory orders was due largely to a jump in big-ticket item bookings, and amid expectations that the worst of the US-China trade war could still be ahead the data was not seen as any kind of turning point for German industry.
According to Thomas Gitzel, Economist at VP Bank:
‘The decent increase in June is good news, but is no cause for immediate celebration. In view of the trade conflicts, humility is required’
While US-China trade tensions didn’t hit the Euro as much as the US Dollar, they weigh on the Eurozone outlook and played a part in today’s EUR/USD readjustment.
US Dollar (USD) Rebounds Slightly Following Monday Tumble
Fears of US-China trade relations collapsing drove sharp market movement yesterday, as investors digested the latest trade fears.
Safe haven currencies like the US Dollar (USD) climbed against trade-correlated currencies, but other safe havens like the Japanese Yen (JPY) saw even stronger surges on the news.
Even the Euro, which is sometimes seen as relatively safe, climbed against the US Dollar due to expectation that the US economy would be directly hit by a US-China trade war or an increasingly speculated currency war.
Due to how sharp Monday’s movements were though, forex markets rebounded slightly today. This was a large part of the US Dollar’s gains against the Euro.
The US Dollar has not seen any fresh notable support this week, as yesterday’s US non-manufacturing PMI from ISM slowed to 53.7 rather than the predicted 55.5.
Euro to US Dollar (EUR/USD) Exchange Rate Could Slump Again if German Data Disappoints
The rest of this week’s economic calendar will be a little quitter in terms of Eurozone and US data, with the biggest stats still due for publication largely German factory and trade figures.
This leaves the Euro to US Dollar (EUR/USD) exchange rate reacting to potential developments in US-China trade tensions.
If the trade war escalates or a full-blown currency war becomes reality, the US Dollar is more likely to be affected due to expectations of a direct impact on the US economy. However, these concerns would also limit the Euro’s potential for gains.
As a result, upcoming German data may be more likely to influence direction for EUR/USD.
Wednesday will see the publication of German industrial production and French trade balance, with German trade balance and French industrial production following on Friday.
If German data continues to beat forecasts, hopes of resilience in German manufacturing could bolster the Euro to US Dollar (EUR/USD) exchange rate, but weaker data would cause the pair to fall closer to its recent lows.