Euro US Dollar (EUR/USD) Exchange Rate Wavers on Better-than-Expected PMI in the Euro Area
The Euro US Dollar (EUR/USD) exchange rate is fluctuating as Eurozone PMIs print better than expected, supported by a hawkish ECB.
At time of writing, the EUR/USD exchange rate is around $1.0635, relatively unchanged from this morning’s opening levels.
Euro (EUR) Supported by Surprising PMI Data
The Euro (EUR) is experiencing mixed success this morning in the wake of a hawkish European Central Bank (ECB) rate hike yesterday. With ECB President Christine Lagarde reassuring investors of further rate hikes, the Euro enjoyed a boost.
Moderate tailwinds continued through to this morning with the release of flash PMIs for both services and manufacturing. Despite remining in contraction territory, both releases printed better than forecasted. Against an expected 48.5, the service sector improved to 49.1, edging closer to expansion territory. The highest level in four months, the score also pointed to a notable improvement in tourism and recreation.
Manufacturing PMI also points to a modest improvement. Despite a sixth consecutive month of declining activity, it was the softest contraction in six months, and a third straight month of improvement.
Euro investors remain buoyed after ECB Lagarde followed the interest rate decision with a hawkish statement. Two further half-percent hikes are to be expected as inflation remains far above the target rate.
US Dollar (USD) Quiet ahead of PMI Data Release
The US Dollar lost most of its steam this morning amid a lack of data. Providing some modest support to the ‘Greenback’ is the general retreat in risk appetite. A particularly cautious market mood could be increasing safe-haven flows.
Meanwhile, capping any further losses thanks to a lack of data, is the returning hawkish stance from the Federal Reserve. After the central bank raised its interest rate in line with expectations, Fed Chair Jerome Powell admitted that inflation has some way to go before it can be confirmed its on a downward path. Powell added that ‘ongoing (rate) increases will be appropriate’ in order to bring inflation down to the 2% goal.
Euro US Dollar Exchange Rate Forecast: US PMI to Soften the Greenback?
Looking ahead, the Euro US Dollar exchange rate could see a modest drop with the release of flash PMIs. Despite an expected modest improvement in services and unchanged manufacturing, continued contraction could weigh on the US Dollar.
Meanwhile, without any major data to trade on, the Euro could be left to market sentiment.
