Euro US Dollar (EUR/USD) Exchange Rate Rises amid EU Service Sector Recovery
The Euro US Dollar (EUR/USD) exchange rate is strengthening today, despite mixed preliminary PMI data for the Eurozone.
At the time of writing, EUR/USD is trading at around €1.0857, an increase of roughly 0.3% over today’s opening levels.
Euro (EUR) Wavers amid Mixed PMI Data
The Euro (EUR) is trading within narrow boundaries today, following a mixed slate of private sector data.
In February, the manufacturing sector contracted further, but the services index showed a further recovery. By printing at a flat 50, this showed that the sector had finally snapped a six month contraction streak.
The lacklustre manufacturing data is also serving to stoke bets on interest rate cuts from the European Central Bank (ECB).
Dr Cyrus de la Rubia, Chief Economist at HCOB, commented:
‘The manufacturing sector is the drag on the European economy. That is clearly demonstrated by the sharp decline in production and the drag on new orders…The latest HCOB PMI figures are likely to disappoint the ECB. Output prices have increased at a faster pace for the fourth month in a row.’
Elsewhere, a risk-on market mood is likely pressuring the Euro during today’s trade. Due to the common currency’s safer stature, investors may be moving away in favour of riskier opportunities.
US Dollar (USD) Slips amid Ongoing Risk Rally
The US Dollar (USD) is weakening so far today, as bullish trading conditions weigh heavily on the safe-haven currency.
Nvidia, one of the world’s leading AI chip manufacturers, saw its shares spike overnight amid increasing optimism. This prompted a rally in stock markets across the board, prompting investors eye riskier assets.
Additionally, the latest FOMC meeting minutes skewed more dovish than expected last night. This prompted investors to begin eyeing an interest rate cut in June. According to CME’s FedWatch tool, markets now anticipate a 52% chance of a rate cut then.
However, the ‘Greenback’ is likely being cushioned as the Federal Reserve still seems hesitant to cut rates too quickly.
The minutes stated:
‘Participants highlighted the uncertainty associated with how long a restrictive monetary policy stance would need to be maintained. While most participants noted the risks of moving too quickly to ease the stance of policy, a couple pointed to downside risks to the economy associated with maintaining an overly restrictive stance for too long.’
EUR/USD Exchange Rate Forecast: ECB Minutes in Focus
Looking ahead for the Euro, volatile trade may strike the Euro this afternoon following the publication of the latest European Central Bank meeting minutes.
Recent communication has reaffirmed the central bank’s data driven approach, and these minutes may skew dovish. Because of this, the Euro could slide after their publication, as investors adjust their interest rate cut bets.
For the US Dollar, the afternoon brings the release of the latest preliminary PMI releases. While not as impactful as the ISM readings, the ‘Greenback’ could struggle if both sector readings slip as forecast.
