Euro US Dollar (EUR/USD) Exchange Rate Muted as Fed Slashes Rates for Third Time
The Euro US Dollar (EUR/USD) exchange rate was left flat today, and the pairing is currently trading at around $1.1151.
The US Federal Reserve cut interest rates for the third time this year and indicated that further easing is likely.
Despite the hawkish tone of the Fed, this did little to buoy the US Dollar (USD) and this suggests investors are growing increasingly cautious about risks posed by trade tensions to the economic outlook.
Commenting on this, senior foreign exchange strategist at IG Securities in Tokyo, Junichi Ishikawa said:
‘The Fed is expected to be on hold in December, but the markets are trying to price in a rate cut next year, because people doubt that talks to end the trade war will go smoothly.
‘If the jobs data prints to the weak side, that would put even more pressure on the dollar.’
Meanwhile, the Euro (EUR) was able to hold onto its recent gains against the US Dollar on Friday, as investors fretted that America would soon be joining the global economic slowdown.
US-China Tensions Weigh on US Dollar (USD)
Today saw the US Dollar under pressure against the single currency after a Bloomberg news report claimed that Chinese officials have doubts about securing a long-term agreement to end the US-China trade war.
On Thursday, US President Donald Trump said Washington and Beijing would soon announce a new site where the two leaders will sign the ‘Phase One’ trade deal.
President Trump and his Chinese counterpart, Xi Jingping were scheduled to sign the agreement at a now-cancelled summit in Chile.
However, these positive comments from the US President did little to offset concerns raised by the Bloomberg report.
Euro (EUR) Flat as Inflation Slumps to Three-Year Low
On Thursday, data revealed that the Eurozone’s economy grew by a stronger-than-expected 0.2% during the third quarter, defying predictions for a slowdown.
While the flash data was better than forecast, it was still generally weak which left the single currency muted at the end of the week.
However, separate data from Eurostat revealed that the bloc’s flash annual inflation rose by 0.7% in October, the lowest since November 2016 and down from the previous month’s increase of 0.8%.
This left the Euro muted as the European Central Bank (ECB) aims to keep inflation below, but close to 2%, and despite years of easing, the inflation rate continues to move further from the bank’s target range.
Euro US Dollar Outlook: Will USD Slide as Hiring Slows?
Looking ahead to this afternoon, it is likely the US Dollar will slide against the Euro following the release of the US non-farm payrolls.
If October’s payrolls fail to rise as high as predicted and hiring slows to a five-month low, this would highlight concerns about the world’s largest economy and the ‘Greenback’ is likely to slump.
Meanwhile, the US Dollar could slide further on the latest US ISM manufacturing PMI which is expected to remain firmly in contraction territory.
If October’s PMI slides further into contraction than predictions suggest, it is likely the Euro US Dollar (EUR/USD) exchange rate will slump at the end of the week.
