EUR/USD Climbs on Mixed US Data
- Euro (EUR) Struggles to Hold Ground – Despite positive German data on Wednesday
- US Dollar (USD) Eases Lower – Slipping Fed rate hike bets weighs on ‘Greenback’ today
- US PMI Disappoints – Poor house and oil data also weigh on USD
- Update: Durable Goods Orders Up – But business investment drops
- Forecast: US GDP Due Friday – Fed Chair Yellen also expected to speak
The Euro to US Dollar slowly heads back to the week’s opening levels on Thursday, gradually recovering from its two month low as excitement towards the US Dollar wanes. EUR/USD trended in the region of 1.1182 at the time of writing.
News that a ‘breakthrough’ agreement had been made by the Eurozone on Greek’s debt crisis slightly boosted sentiment towards the Eurozone (and Euro), while the US Dollar continued to be weighed down by mixed data and lower Fed hike bets.
The highly anticipated US durable goods orders came in with a surprising increase from 1.3% to 3.4%, despite being expected to drop to 0.5%. The amount of new jobless claims was also better-than-expected, with 268k new claims being made despite forecasts projecting 275k.
Unfortunately, according to US News, the optimistic news was dulled by the revelation that business investment had fallen for the third month in a row, weighing on the US Dollar’s chances of continued strength.
Further EUR/USD exchange rate movement is likely to occur before the weekend as the US publishes annualised first quarter growth and personal consumption data.
If the results of the reports deviate from forecasts they could have an impact on US rate hike expectations and see the Euro fluctuate against its US rival.
As it stands, economists have forecast that the US economy expanded by 0.9% in the first quarter, up from expansion of 0.5% in the final quarter of 2015.
(Previously updated at 8:59 on 26/05/2016)
EUR/USD Begins to Recover after Poor US PMI
The Euro to US Dollar exchange rate began to gain on Wednesday afternoon after poor US data left the ‘Greenback’ weaker, its rally seemingly over for now. At the time of writing, EUR/USD was up around 0.2% and trended in the region of 1.1157.
Despite news that the US advance goods trade deficit had worsened less than expected, from -$57.1b to -$57.5b, the majority of Wednesday’s US news was well below expectations.
May’s preliminary Services PMI came in at 51.2 from April’s 52.8. The Composite score weighed on the Dollar considerably by worsening from 52.4 to a low 50.8.
Markit economist Chris Williamson said of the result; ‘A deterioration in the survey data for May deal a blow to hopes that the US economy will rebound in the second quarter after the dismal start to the year.’
Other poor data included the quarterly house price purchase index, which worsened from 1.5% to 1.3%. US crude oil inventories also plummeted, from 1310k to -4226k, much worse than the expected drop of -2000k.
Earlier…
(Published 10:34 25.05.2016)
The Euro to US Dollar (EUR/USD) exchange rate sank around -80 pips during Tuesday’s session as the US Dollar continued to strengthen in response to optimistic US data and hawkish Federal Reserve policymakers – while Eurozone data left the Euro flat.
EUR/USD began to attempt a recovery on Wednesday morning as Fed rate hike bets slowed. At the time of writing, the pair was trending narrowly in the region of 1.1144, slightly moving in the Euro’s favour after hitting a two-month-low of 1.1135.
Euro (EUR) Attempts Rebound on Positive German Data
The Euro was left flat throughout Tuesday’s session as mixed data left investors with little reason to buy the shared currency.
Final Q1 German Gross Domestic Product (GDP) released on Tuesday morning came in to match expectations, with the quarterly figure printing at 0.7% and the yearly score coming in at 1.6%.
Any defence the Euro gained from this was reversed later however, as ZEW’s latest economic sentiment surveys showed a notable drop.
While the German current situation survey was up from 47.7 to 53.1, German economic sentiment almost halved from 11.2 to 6.4 despite being projected to improve to 12. General Eurozone economic sentiment also dropped substantially, from 21.5 to 16.8.
However, the Euro’s defences were boosted a little more on Tuesday morning by a new slew of German data, including GfK’s consumer confidence report for June. Consumer confidence was expected to hold steady at 9.7 but improved to 9.8.
German IFO figures for May also printed well above expectations. The business climate report improved from 106.6 to 107.7, past the expected 106.8. Current assessment climbed from 113.2 to 114.2, beating forecasts of 113.3. Lastly, expectations jumped from 100.4 to a higher 106.6, well up from the expected 100.8.
US Dollar (USD) Remains Sturdy on Hawkish Federal Reserve Policymakers
The US Dollar has increased in strength over the last week after a number of Federal Reserve officials went on-record to talk about the possibility of a June interest rate hike.
Recent US Dollar bullishness had been influenced by news that San Francisco Fed President John Williams claimed a rate hike was possible despite the possibility of a ‘Brexit’ later on the month. Previously, many economists suggested that the UK leaving the European Union could cause a butterfly effect of economic difficulty.
However, ‘Greenback’ rallies slowed on Wednesday as investors remained uncertain of how likely a June rate hike could be, with St Louis Fed President James Bullard taking a comparatively dovish stance.
According to CNBC, while US labour data has been optimistic, Bullard sees no reason to ‘prejudge June’. After Fed policymakers had recently been asserting that a June hike was still possible, this hesitant approach from Bullard weighed on US Dollar sentiment.
Tuesday’s US data was largely optimistic, with April’s new home sales report leaping from -1.5% to 16.6%, well above the expected 2.0%.
Euro to US Dollar (EUR/USD) Exchange Rate Forecast: US PMI Wednesday, Goods Orders Thursday
The Euro to US Dollar exchange rate could easily continue to move in the US Dollar’s favour in the coming days with Eurozone data virtually done for the week and the Euro still moving relatively flatly.
Wednesday afternoon sees the release of a slew of US data, including April’s advance goods trade deficit which is currently forecast to worsen from -$56.9b to -$60.0b. This will be followed by house price reports, as well as preliminary Services and Composite PMI. Lastly, the May 20th update to US crude oil inventory figures is also due.
The US Dollar will also likely move in response to Thursday’s preliminary durable goods orders report. The highly anticipated score is currently predicted to slow from 1.3% to 0.4%. Jobless claim data will also be released during Thursday’s session.
With June’s central bank meetings approaching, policymakers from the European Central Bank (ECB) and Federal Reserve may continue to speak throughout the week.
Confidence in the ECB’s current easing measures from policymakers could help support a Euro recovery, but the US Dollar is unlikely to be dented unless the Federal Reserve suddenly adopts a dovish tone.
The Euro to US Dollar (EUR/USD) exchange rate currently trades at around 1.1144, while the US Dollar to Euro (USD/EUR) exchange rate trends within the region of 0.8970.