EUR/USD Exchange Rate Falls Despite Strong Eurozone Manufacturing PMI
The Euro to US Dollar (EUR/USD) exchange rate fell by -0.2% today, with the pairing currently trading around $1.17.
The Euro (EUR) failed to gain on the US Dollar (USD) today despite a stronger-than-expected Eurozone Manufacturing PMI for July, which rose from 51.1 to 51.8. As a result, EUR investors have become more hopeful that the Eurozone’s economy could be on the road to recovery.
Chris Williamson, Chief Business Economist at IHS Markit, commented on the data, saying:
‘Eurozone factories reported a very positive start to the third quarter, with production growing at the fastest rate for over two years, fuelled by an encouraging surge in demand. Growth of new orders in fact outpaced production, hinting strongly that August should see further output gains. The order book improvement has also helped restore business confidence about the outlook in July to January’s pre-pandemic peak.’
However, EUR traders are remaining cautious as the number of coronavirus cases continue to grow throughout Europe. Consequently, markets are becoming increasingly concerned that a second-wave could severely compromise the bloc’s economy.
US Dollar (USD) Edges Higher as US Manufacturing PMI Beats Forecasts in July
The US Dollar (USD) rose today following a better than expected US ISM manufacturing figure, which rose to 54.2 in July, indicating a faster expansion in America’s factories.
Analysts at Reuters commented on the data:
‘U.S. manufacturing activity accelerated to its highest level in nearly one-and-half years in July as orders increased despite a resurgence in new COVID-19 infections, which is raising fears about the sustainability of a budding economic recovery.’
Meanwhile, the ‘Greenback’ has also benefited from increased safe-haven demand on growing fears over US-China trade tensions. As a result, investors have sought out safe-haven currencies as the world’s two largest economies continue to clash.
US-China trade relations deteriorated after US President Donald Trump threatened to ban the Chinese software company, TikTok, from the United States.
EUR/USD Outlook: Could a Dovish Outlook for America’s Economy Weigh on the ‘Greenback’?
US Dollar (USD) investors will be looking ahead to tomorrow’s release of the latest US Factory Orders figures for June. If these improve, then we could see confidence in the ‘Greenback’ continue to grow.
Euro (EUR) investors, meanwhile, will be looking ahead to Wednesday’s release of the latest Eurozone retail sales figures for June. However, if these fall below consensus we could see the single currency suffer.
Wednesday’s US ISM Non-Manufacturing PMI for July will also influence the direction of the US Dollar. As a result, we could see the USD/EUR exchange rate shed some of its gains if America’s economic outlook deteriorates.
