- Euro Exchange Rates Edge Higher – Mixed results from domestic data
- USD Rebounds – Yen weakness and safe-haven demand fuels gains
- EUR/USD Trending Narrowly – Yellen speech weighs on USD
- Eurozone Final Q1 GDP Ahead – Will initial estimates be revised?
Weak US Labour Market Data Weighs on Fed Outlook
Yesterday evening Federal Reserve Chairwoman Janet Yellen delivered a dovish speech. Moving away from previous assurances that it was now ‘appropriate’ to hike the official cash rate, Yellen stated that the latest Non-Farm Payrolls data has caused the Fed to rethink policy outlook.
The Euro to US Dollar (EUR/USD) exchange rate is currently trending in the region of 1.1367 in the early stages of Tuesday’s European session.
(Last Updated June 6th, 16:51)
Euro (EUR) Exchange Rates Climb despite Weak German Factory Orders
The Euro to US Dollar (EUR/USD) exchange rate was trending within a tight range on Monday afternoon.
Despite registering a mixed-bag of domestic data results, the single currency advanced versus the majority of its closest peers. This can be attributed to speculation of delays to a Federal Reserve rate hike after last week’s US labour market data showed shockingly few newly employed in May.
Also aiding the Euro’s appreciation are improved hopes that the European Central Bank (ECB) will look to delay any alterations to monetary policy so the current stimulus measures can be given time to affect changes. It is worth mentioning that inflation in the Eurozone still remains well short of the ECB’s target, however.
April’s German Factory Orders disappointed, however, with annual orders unexpectedly contracting by -0.5% and monthly orders by -2.0%. In response to the data Ralph Solveen, an economist at Commerzbank, said;
A drop in orders ‘is more of a counter-movement to rather strong figures from March, which were pumped up by an unusual high number of big-ticket items. If you look for a slightly longer period, the underlying trend in orders is more or less unchanged.’
German, French, Italian and Eurozone retail sales improved in May with only Italian sales registering losses. Italy’s sales deficit had narrowed, however.
The Euro to US Dollar (EUR/USD) exchange rate is currently trending in the region of 1.1361, little changed on the day’s opening levels. Further movement in the pairing is likely to be limited ahead of today’s speech from Federal Reserve Chairwoman Janet Yellen.
US Dollar (USD) Exchange Rate Rebounds from Shock Non-Farm Payrolls Figures
The tail end of last week saw the US Dollar register significant losses versus its major peers after domestic data failed to impress. Change in Non-Farm Payrolls added just 38,000 newly employed in May; well below the market consensus of 160,000.
However, the US asset stabilised over the weekend and registered gains versus a number of peers in the early stages of Monday’s European session.
The appreciation can be linked to heightened safe-haven demand after Asian stocks volatility saw investors shy away from high-yielding assets.
Reduced demand for the safe-haven Japanese Yen also fuelled Dollar gains. The Yen’s depreciation can be linked to jawboning from Japanese officials said a senior Japanese bank dealer;
‘What we’ve found is jawboning is coming from officials when the dollar comes closer to ¥105.’
A speech from Boston Federal Reserve President Eric Rosengren aided US Dollar despite repeating ‘gradual’ rhetoric with regards to the Fed’s policy outlook. He said;
‘It is my expectation that economic conditions will continue to gradually improve, which in turn would justify further actions to normalize policy, continuing a gradual return to a more normal rate environment.’
Rosengren also stated that it was important to gauge whether or not the dismal NFP data was an anomaly.
The Euro to US Dollar (EUR/USD) exchange rate dropped to a low of 1.1328 during Monday’s European session.
EUR/USD Exchange Rate Forecast: Janet Yellen Speech to Provoke Volatility
Given the volatility stemming from uncertainty surrounding Pound Sterling and the impact that is having on the market as a whole, there is every chance that the EUR/USD exchange rate will see large price swings throughout Monday’s trade.
In terms of domestic ecostats, a speech from Federal Reserve Chairwoman Janet Yellen is likely to be highly impactful, especially since the weak NFP result significantly reduced hopes of a near-term rate hike.
If Yellen suggests that the Fed will need to be cautious, moving away from more hawkish rhetoric following the most recent interest rate decision, there is a high chance that the US Dollar will see current uptrends reversed.
The Euro to US Dollar (EUR/USD) exchange rate reached a high of 1.1371 during Monday’s European session.