Euro US Dollar Exchange Rate Rallies Despite Underwhelming German Data
The Euro US Dollar (EUR/USD) exchange rate is firming despite another negative Germany’s economic sentiment print.
At the time of writing the EUR/USD exchange rate is trading at around $1.01176, which is up roughly 0.4% from this morning’s opening rate.
Euro (EUR) Mixed as Data Weighs on Investors
The Euro (EUR) is trending higher this morning as investors absorb Germany’s economic sentiment data. The ZEW economic sentiment index reported another decline, bringing sentiment down to -61.9 during September.
This is the third consecutive drop in economic sentiment within Germany. This drop is being attributed to the energy crisis currently facing the Eurozone.
In a statement ZEW president, Achim Wambach, relayed his concern for Germany’s industrial sector:
‘The prospect of energy shortages in winter has made expectations even more negative for large parts of the German industry. Added to this is a less favourable assessment of growth in China.
‘The current statistical figures already show a decline in incoming orders, production and exports.’
The increasingly gloomy outlook for the Eurozone’s largest economy unsurprisingly unsettled EUR investors and limited the Euro’s upside potential.
US Dollar (USD) Weakened by Risk-On Market Mood
The US Dollar (USD) is weak today as an upbeat market mood saps the demand for the safe-haven currency.
The change in market sentiment is largely attributed to Ukraine. Yesterday the country was able to reclaim territory during a successful counterattack on Russian forces.
Until now investor focus has been on the gas supply disruption to Europe caused by Russia. However, this victory has recentred focus on the broader conflict and cheered global investors as this victory could signal a swifter end to the war.
USD trade could also be hindered by dropping US Treasury yields today. The yields are likely falling ahead of the latest US inflation figures.
Euro US Dollar Exchange Rate Forecast: Soft US Inflation to Drag on USD?
The Euro US Dollar (EUR/USD) exchange rate could continue to strengthen following the latest US inflation release.
August’s inflation figures, which are due later today, are expected to report domestic inflation dropped from 8.5% to 8.1%. This could mean that the Federal Reserve pursues a less aggressive interest rate hike in October. This in turn, could strengthen risk-on trading amongst USD investors.
However, the US Dollar’s losses could be tempered by August’s core inflation figures, which are forecast to rise to 6.1% and indicate underlying price pressures remain.
President of the European Commissions, Ursula von der Leyen will give a speech tomorrow. If her speech offers further insight into how the EU plans to tackle the ongoing energy crisis, then the Euro could extend its gains.
However, if investors are not receptive to her rhetoric, then the Euro could soften.