EUR/USD exchange rate dented amid falling German morale
The euro US dollar (EUR/USD) exchange rate is on the defensive this morning following the publication of Germany’s latest ZEW economic sentiment index.
At the time of writing, the EUR/USD exchange rate is trading at around €1.0919, down roughly 0.2% from this morning’s opening rate.
Euro (EUR) undermined by falling morale
The euro (EUR) is on the back foot against the majority of its peers this morning following a larger than expected deterioration in Germany’s latest ZEW economic sentiment index.
The index tumbled from a previous reading of 41.8 down to 19.2 in August, well behind a more modest expectation of a decline to 32.
The indicator marked the lowest reading in a seven-month period, and confirmed a sharp cooldown in morale in the Eurozone’s largest economy, hobbling EUR exchange rates as a result.
Professor Achim Wambach from ZEW commented following the release:
‘The economic outlook for Germany is breaking down. It is likely that economic expectations are still affected by high uncertainty, which is driven by ambiguous monetary policy, disappointing business data from the US economy and growing concerns over an escalation of the conflict in the Middle East.’
Further weighing on the common currency this morning is an increase in risk appetite. As a safe-haven currency, this morning’s cheery trade has left the euro struggling to catch bids.
US dollar (USD) quiet ahead of high impact data
The US dollar (USD) is trading in a wide range against the majority of its peers this morning as USD investors await the latest producer price index (PPI) later this afternoon.
As the index is expected to show that factory price growth slowed in July, expected to fall from 0.2% to 0.1%, the ‘greenback’ could experience fresh selling pressures should the data print as expected.
In the interim, the US dollar is also being hobbled by an improvement in risk appetite. As markets opt for riskier assets, the safe-haven USD remains on the back foot.
EUR/USD forecast: US inflation in the spotlight
Looking ahead, the primary catalyst of movement for the euro US dollar exchange rate looking past this afternoon’s PPI release will be the publication of the US’s latest inflation data, scheduled for release tomorrow.
As both headline and core inflation are expected to cool, USD could falter against its peers should the latest inflation data ramp up bets of a Federal Reserve interest rate cut in September.
Turning to the euro, the Eurozone’s latest employment change is scheduled for release tomorrow, which could infuse volatility into the single currency.
As the index is forecast to fall from a previous reading of 0.3% down to 0.2%, this could weigh on the common currency during mid-week trade.