Euro US Dollar (EUR/USD) Exchange Rate Falls amid Risk-On Impulse
The Euro US Dollar (EUR/USD) exchange rate drops from earlier gains despite a better-than-expected recovery in Germany’s economy.
At time of writing, the EUR/USD exchange rate is around $1.0365, down 0.42% from this morning’s opening levels.
Euro (EUR) Slips Despite Hopes of Less Severe Recession
The Euro (EUR) failed to capitalise on an upwardly revised GDP growth in Europe’s second largest economy. The German economy unexpectedly expanded by 0.4% QoQ, beating out preliminary estimates of 0.3%, and grew by 0.1% in Q2.
Elsewhere, heightened bets of rate hike expectations could be limiting further losses for the single currency. The latest meeting minutes from the European Central Bank (ECB) hinted at further interest rate rises.
A modestly improved consumer confidence in Germany is also supporting the Euro. Despite still firmly in negative territory, the second consecutive improvement further lends support to inflationary pressures having peaked.
US Dollar (USD) Recovers amid Uptick in US Treasury Bond Yields
Meanwhile, the US Dollar is clawing back lost ground amid a quiet Thanksgiving market. A modest climb in Treasury bond yields has spurred support for the US Dollar.
Weighing on the ‘Greenback’, however, is a general acceptance from the market that the federal Reserve will finally slow their pace of policy tightening. Disappointing data from earlier in the week is also sapping demand amid a dovish Fed.
Lending some considerable support to the safe-haven US Dollar, is concerning news out of China. Soaring Covid infections look to further derail the stuttering Chinese economy. With reports of another daily record of infections, mass testing and increased restrictions are set to impact Beijing and Shanghai. A return to a risk-on appetite could see the US Dollar strengthen.
Euro US Dollar Exchange Rate Forecast: Softening Eurozone Inflation to Buoy the Euro?
Looking ahead to next week, the Euro US Dollar exchange rate could see further movement with the release of inflation data for the Eurozone. An expected softening of headline CPI could see rate hike best slashed.
Meanwhile, the US Dollar could see a boost if GDP growth comes in as predicted. A forecasted 2.7% climb could see the ‘Greenback’ strengthen on a perceived resilient economy.
