The Euro made a few strides towards strengthening earlier today as positive German data boosted the single currency. The gains were short-lived, however, as Eurozone data holds the Euro back. Meanwhile US Data shows positive results across the board, helping the US Dollar extend its bullish run against all of its major peers.
Yesterday the Euro recorded widespread losses following a succession of poor data releases throughout the week. The straw that broke the camel’s back came in the form of retracting German Consumer Prices which fell by -0.1% in July and by -0.8% annually. Eurozone data also failed to impress; Eurozone seasonally adjusted Construction Output declined by -0.7% in June and plunged by -2.3% annually.
The story was quite different from a US perspective yesterday. The Federal Reserve released the minutes from late July’s FOMC meeting. The minutes outlined the declining unemployment level as a positive leaver to hike interest rates as Laura Parsons, writing for Future Currency Forecast, explains; ‘In the immediate aftermath of the publication of minutes from the latest Federal Open Market Committee meeting the Euro slumped to an almost 11-month low against the US Dollar. The minutes increased expectations that the FOMC will increase interest rates in early 2015 by outlining progress in the US labour market and acceleration in inflation’.
The Euro to US Dollar exchange rate is currently trending in the region of 1.3285.
Earlier today the Euro made small gains against many currencies after German domestic data impressed. This was despite a string of disappointing Eurozone domestic data results published just half an hour later.
German Composite PMI exceeded the forecast figure of 54.6 to 54.9. The German Manufacturing PMI also eclipsed anticipation having fallen to 52.0 instead of the forecast figure of 51.5. Similarly the German Services PMI rose beyond the forecast figure of 55.5 to 56.4.
Eurozone data results were very different from that of the Germans. The Eurozone Composite PMI fell from 53.8 to 52.8, Manufacturing PMI dropped from 51.8 to 50.8 and Services PMI declined from 54.2 to 52.8.
At first it seemed that the good results from German domestic data would outweigh the bad results from Eurozone data. However, the Eurozone Consumer Confidence numbers did not make happy reading for those invested in the single currency. Eurozone Consumer Confidence has fallen to -10.0 in August from -8.4 in July.
US data has been impressive throughout the course of the week, and today’s results have not broken that tradition. US Continuing Claims and Initial Jobless Claims both saw a positive declination which is likely to increase the speculation surrounding a near-future interest rate hike.
The US Manufacturing PMI experienced a healthy gain from 55.8 to 58.0. Tim Moore, Senior Economist at Markit, commented on the positive manufacturing data stating; ‘Overall, with job hiring gathering momentum and input buying expanding at the sharpest pace for at least seven years, it seems US manufacturers are increasingly confident that the recovery is firmly back on track and are gearing up for a sustained rebound in production schedules over the months ahead’.
US Existing Home Sales, Leading Indicators and Philadelphia Fed all produced positive results as well. In particular the Existing Home Sales data was far better than anticipated having been forecast to retract by -0.5% the actual result showed a growth of 2.4%.
The Euro to US Dollar hit a low today of 1.3239.
Forecast for the Euro to US Dollar Exchange Rate
Tomorrow will be a big day for both the US and the European Union. Federal Reserve Chair Janet Yellen and European Central Bank President Mario Draghi will both be speaking at the central bank symposium in Jackson Hole, Wyoming. Traders and analysts will be closely scrutinising every word spoken in the hope of finding clues as to the timing of an interest rate hike.
The speech from Yellen will be of particular interest given the increased pressure to hike rates after yet more positive labour market data.
The Euro to US Dollar hit a high today of 1.3290.