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Euro US Dollar (EUR/USD) Exchange Rate Rises as US ‘Recession Risk is Real’

Euro US Dollar (EUR/USD) Exchange Rate Rises as US Factory Activity Plummets to Decade-Low

UPDATE 01/10/19: The Euro US Dollar (EUR/USD) exchange rate rose and the pairing is currently trading at around $1.0930.

Earlier on Tuesday, the US Dollar rallied against rival currencies, rising to a 29-month high.

However, weak manufacturing data left the Dollar under pressure.

The highly-anticipated ISM manufacturing PMI came in below forecast, falling further into contraction despite expectations the sector would claw its way above the 50-mark.

Factory activity slumped to a decade-low as trade tensions weighed on exports and further heightened concerns of a slowdown in US growth in the third quarter.

Commenting on the disappointing data, Deutsche Bank Securities chief economist, Torsten Sløk stated:

‘This is serious. There is no end in sight to this slowdown, the recession risk is real.’

Euro US Dollar (EUR/USD) Exchange Rate Falls despite Decade-Low US Business Confidence

UPDATE: The Euro US Dollar (EUR/USD) exchange rate slumped and the pairing is currently trading at around $1.0899.

The US Dollar edged up against the single currency despite data showing the Chicago Business Barometer fell to 47.1 in September.

The Chicago PMI slumped as business confidence fell to its lowest level on a quarterly basis since Q3 2009.

Added to this, production saw the largest decline since May 2009.

However, the single currency was left under pressure as German harmonized inflation unexpectedly slowed for the third month in a row.

The bloc’s largest economy saw consumer prices edge up by an annual rate of 0.9%, the lowest reading since November 2016.

This was also the fifth consecutive month that inflation has remained below the European Central Bank’s (ECB) target for the Eurozone of close to but below 2%.

Euro US Dollar (EUR/USD) Exchange Rate Left Flat as German Retail Sales Edge Up

The Euro US Dollar (EUR/USD) exchange rate remained muted and the pairing is currently trading around $1.0936.

Data revealed that German retail sales edged up slightly in August, calming fears that the recession in the manufacturing sector is pushing the economy towards recession.

Monthly sales rose by 0.5% while annual sales increased by 3.2% in August, leaving the single currency muted.

Thanks to uncertainties surrounding trade and the UK’s departure from the European Union, the bloc’s largest economy saw its export-dependent manufacturing sector fall into a recession.

Meanwhile, further data added to signs the German economy remained immune to a downturn driven by the manufacturing sector.

The Labour Office revealed the number of Germans out of work fell by 10,000 to 2.276 million people.

The fall came despite forecasts suggesting this figure would rise.

Commenting on this, Head of the Labour Office, Detlef Scheele noted:

‘The economic downturn again is reflected in the labour market in September. But all in all, the labour market is still in a robust shape.’

However, Scheele also noted that employment is losing momentum and demand for new employees continues to slow.

US Dollar (USD) Left Muted Ahead of October US-China Trade Talks

Ahead of October’s US-China trade talks, China’s Vice Commerce Minister Wang Shouwen said both sides must resolve their dispute ‘with a calm and rational attitude’.

Speaking at a news conference, Wang noted that Vice Premier Liu He would be heading to Washington for talks the week after China’s National Day holiday, which ends on 7 October.

He added:

‘We believe this will benefit both countries’ people and the world.’

Meanwhile, on Friday the safe-haven Dollar likely benefitted from comments from China’s top diplomat noted the current trade and tariff disputes could send the world towards a recession.

However, he added that Beijing was committed to resolving tensions with the US in a ‘calm, rational and cooperative manner’.

The upswing in risk appetite from positive comments on a US-China trade deal has likely left the pairing muted.

US Dollar (USD) Left Flat as Business Investment Continues to Weaken

Meanwhile, at the end of last week’s session data showed US core capital goods orders unexpectedly slumped in August.

Added to this, business investment continued to weaken, declining at its fastest pace in more than three and a half years during Q2.

Last week, Federal Reserve Chair, Jerome Powell stated trade uncertainty had ‘discouraged them from investing in their businesses’.

The US Commerce Department said orders for non-defense capital goods fell 0.2%.

This was due to weak demand for electrical equipment, appliances and components, and computers and electronic products.

As this is a closely-watched proxy for business spending, it is likely this left the US Dollar under pressure.

Euro US Dollar Outlook: Will a Steeper German Manufacturing Downturn Send EUR Lower?

Looking ahead to this afternoon, it is likely the US Dollar (USD) will slide against the Euro (EUR) following the release of September’s Chicago PMI.

If the PMI edges closer to stagnation, it is likely ‘Greenback’ sentiment will fall.

Meanwhile, on Tuesday the Dollar could rebound against the single currency following September’s final German manufacturing PMI data.

If data reveals the downturn in the German manufacturing sector is worse than expected, the Euro US Dollar (EUR/USD) exchange rate will likely slump.