- EUR Buoyed on Eurozone GDP – Euro holds ground despite weak CPI
- US Personal Spending Down – Personal income figures up
- Update: EUR/USD Fluctuates – Poor data holds back both currencies
- Forecast: Eurozone PMIs out this Week – Eurozone retail sales on Wednesday
- Forecast: US Non-Manufacturing ISM on Thursday – Another busy week for US data
US ISM Prints Poorly, EUR/USD Fluctuates
Distaste towards the US Dollar continued throughout Monday and Tuesday as the ‘Greenback’ failed to make a considerable recovery against the Euro.
April’s highly anticipated ISM Manufacturing report scored an unexpectedly low 50.8, letting down forecasts that it would merely worsen from 51.8 to 51.4. This was coupled with warnings from San Francisco Fed President John Williams’ statements that the downside risks of asset drops had also delayed the Fed’s likelihood of hiking the key interest rate.
Despite this, the Euro also weakened after a new report from the European Commission revealed that Italy, Spain and France were now forecast to miss their 2016/17 budget goals.
As a result, EUR/USD fluctuated on Tuesday, hitting a high of 1.1608 followed by a low of 1.1504.
The Euro to US Dollar (EUR/USD) exchange rate made a definitive gain during last week’s session as largely positive Eurozone data boosted the Euro while negative US data and an uninspiring Federal Reserve held down the US Dollar.
Gradually gaining each day of the week, the pair escaped from a low of 1.1218 and sustained an appreciation of over 200 pips. By the end of the week, EUR/USD trended in the region of 1.1442, gaining almost 0.8% on Friday.
Euro (EUR) Boosted by Strong GDP Despite Poor Inflation Data
The Euro strengthened last week as mixed (but largely strong) data beat out the comparatively poor run of US reports.
While still weak against some majors, the Euro recorded considerable gains against the US Dollar despite investor worries that the European Central Bank (ECB) may implement new easing measures this year.
Friday’s key Eurozone reports included disappointing German retail sales of 0.7% and a worse-than-expected Eurozone Consumer Price Index (CPI). The new CPI estimate printed at -0.2%, even worse than the previously projected -0.1%. Core yearly CPI slowed from 1.0% to 0.8%, undermining the 0.9% forecast.
On the other hand, Eurozone unemployment and Gross Domestic Product (GDP) proved positive. February’s disappointing unemployment rate of 10.4% was improved by more than expected in the new March report, to 10.2%.
Meanwhile GDP scored above expectations in both QoQ and YoY prints, with 0.6% and 1.6% respectively.
Poor US Data Keeps US Dollar (USD) Decidedly Weak
The US Dollar’s weakness lasted throughout the entirety of last week’s session as lowered sentiment from dovish Federal Reserve policymakers was met with a regular slew of underwhelming US data.
The Federal Open Market Committee’s (FOMC) latest rate decisions took place on Wednesday last week, with the Fed announcing that the key rate would remain frozen at 0.50%.
However, according to Bloomberg, some analysts have discerned that Fed policymaker attitudes were surprisingly hawkish at the Wednesday meeting, with the usual warnings of obstacles in the global economy strangely absent.
Northern Trust Corp. Chief Economist Carl Tannenbaum stated;
“Their removal of the line on risks is pretty significant, that might reflect increased comfort on the committee that global influences appear more manageable.”
Friday rounded off the US Dollar’s week with March’s personal spending and income reports, which printed below and above expectations respectively.
Personal spending was forecast to hold at February’s impressive score of 0.2%, but instead slipped to 0.1% while the real personal spending report dropped to a stagnant 0.0%, undercutting expectations that it would merely slow from 0.3% to 0.1%.
The US Dollar’s main support as the week ended was the personal income figure of 0.4%, which had risen from 0.2% and surpassed the predicted 0.3%.
Euro to US Dollar (EUR/USD) Exchange Rate Forecast: US ISM Could Boost ‘Greenback’ Sentiment
With the Euro’s unexpectedly large weekly gain over its US rival secured, what does the new week have in store EUR/USD?
The Eurozone is due to have a comparatively quiet week in terms of data, with retail sales data due in the first half of the week and April’s final PMI results due through Friday.
On the other hand, US data releases dominate this week’s economic calendar, with the busy session beginning with Monday’s highly anticipated Manufacturing and prices paid ISM reports.
Wednesday is also set to be a busy day for US data, with Services/Composite ISM reports due as well as fresh factory orders, durable goods and crude oil inventory figures filling up the afternoon.
Federal Reserve policymakers are also due to speak throughout the week, which could lead to EUR/USD movement if their tones are remarkably dovish or hawkish in reflection of the past week’s FOMC decisions.
However, until considerably positive US economic information is published, it’s likely that the Euro’s current rally against the ‘Greenback’ could be allowed to continue.