Euro US Dollar (EUR/USD) Exchange Rate Trading Sideways as German Figures Unsettle Investors
The Euro US Dollar (EUR/USD) exchange rate is muted this morning as data from Germany printed worse than forecast, hindering the currency pair.
At the time of writing the EUR/USD exchange rate is trading at around $0.9797, which is virtually unchanged from this morning’s opening rate.
Euro (EUR) Muted by Sharp Contraction in German Data
The Euro (EUR) is struggling to find support this morning. Data from the Eurozone’s largest economy shows contractions in industrial production and retail sales, which weighing on the currency.
German industrial production shrank by 0.8% and retail sales slumped from 0.7% growth in July to a shocking -1.3%. The poorer-than-expected results have shaken investors further as the data points to a harsh winter recession as the bloc’s economy declines.
Today’s German data follows a decline in the Eurozone’s composite PMI earlier this week, with recession fears increasingly dragging on the Euro. Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, said of the economic downturn:
‘Any hopes of the euro zone avoiding recession are further dashed by the steepening drop in business activity’.
Also weighing on the Euro this morning are fears of continued escalation in the Russia-Ukraine war. Hundreds of bodies were found when military forces retook a large part of Kharkiv. This, coupled with the continued threat of nuclear action from Russia, is denting the single currency.
US Dollar (USD) Under Pressure ahead of Non-Farmer Payroll Data
Meanwhile, the US Dollar (USD) is also struggling to find support this morning,. This has left EUR/USD to waver sideways, after a volatile start during the European trading session.
It would seem that the recent bout of risk aversion has eased somewhat, leaving USD lacking ahead of the non-farm payrolls data this afternoon.
The downturn in USD comes amid the knowledge that the data could potentially have a massive impact on the global market, therefore USD investors are trading with caution this morning.
However, it is likely that the US Dollar’s losses are being limited by continued rate hike bets. This undercurrent of betting continues as the Federal Reserve persists with its hawkish commentary.
Euro US Dollar Exchange Rate Forecast: USD to Firm on Payroll Release?
The Euro US Dollar exchange rate will likely be driven by the US non-farm payrolls data this afternoon.
The data is forecast to print an increase of 250,000 jobs, which is a notable amount. If true, USD could lift as persistent strength in the US labour market gives the Fed more room to raise interest rates.
However, if the data misses forecast then this could be a sign of economic decline. Whilst this could dampen rate rise bets, the Fed has said it is committed to further rate hikes. .
Turing to the Euro, the single currency will likely trade in relation to geopolitical tensions in Ukraine. If the Ukrainian forces continue to regain land, the Euro could firm.
