Euro US Dollar Exchange Rate Dented by ZEW Sentiment Data
The Euro US Dollar (EUR/USD) exchange rate is weakening today as Euro (EUR) sentiment is subdued by falling economic sentiment in Germany. Also weighing upon the single currency are dovish comments from the European Central Bank (ECB).
At the time of writing, EUR/USD is trading at $1.1242, down 0.4% from today’s opening levels.
Euro (EUR) Tumbles despite Positive Data Overall
The Euro is sinking against the majority of its peers today despite a variety of upbeat data releases from Germany and the Eurozone. German industrial production increased in October by more than forecast, and EU GDP met expectations of 2.2% growth.
In the Eurozone, economic sentiment improved upon last month, surpassing expectations of 23.2 to hit its highest level since September. According to the Centre for European Economic Research, 45.4% of the surveyed analysts predicted an improvement in economic activity.
Countering Euro upside however, economic sentiment in Germany has declined from November’s 31.7 to 29.9 in December. Despite beating expectations of a decline to 25.1, the data seems to have subdued trading sentiment, as EUR/USD ticked down for the fourth day in the previous five sessions.
Also weighing upon the single currency, comments from ECB policymaker Peter Kazimir betrayed a dovish tone: Kazimir warned of premature monetary policy tightening, saying it was important that the central bank didn’t ‘tinker with the Asset Purchase Programme (APP)’ and avoided ‘overcomplicating’ things with new envelopes or instruments.
Kazimir’s speech contrasts with comments from his fellow policymakers: hawkish ECB member Robert Holzmann recently remarked that inflation will probably exceed the bank’s 2% target in 2022, with Madis Muller raising similar concerns.
US Dollar (USD) Supported In Spite of Risk-On Mood
The US Dollar (USD) is trading up this afternoon as hopes of imminent monetary policy tightening from the Federal Reserve boost the ‘Greenback’ despite risk-on headwinds.
Market sentiment is elevated as China pledges that it will provide support measures to elevate economic growth; Omicron concerns have also relaxed for the most part, as scientists cite ‘mild symptoms’.
Meanwhile, encouraging hopes of intervention from the Fed, the International Monetary Fund said on Friday that the central bank should tighten monetary policy at a faster pace, echoing last week’s comments from Chairman Jerome Powell.
Both Powell and fellow policymakers hope that faster tapering might bring inflation back under control: according to Bloomberg, the surge in consumer prices this year reflects resilient demand, fragile transportation networks and shortages of both supplies and labour.
Subsequent to hawkish comments from Fed officials, investors have been pricing in a rate hike in May 2022 – although the central bank has been careful to reiterate that markets should not interpret tapering as a sign of anything else.
EUR/USD Exchange Rate Forecast: Lagarde Speech to Influence Euro Trading?
Looking ahead, a speech tomorrow from ECB President Christine Lagarde may drive movement in the Euro US Dollar exchange rate. If Lagarde strikes a dovish tone in the manner of Peter Kazimir, the single currency may come under pressure.
Later in the day, US jobs data is likely to impact ‘Greenback’ sentiment. If job openings fell in October as forecast, EUR/USD may recoup some losses.
