Euro US Dollar Exchange Rate Fluctuates as French and German Economies Shrink
The Euro US Dollar (EUR/USD) exchange rate is trading erratically on mixed PMI data for the Euro area, as the Eurozone edges closer to a recession.
At time of writing the EUR/USD exchange rate is trading around $0.9923, relatively unchanged from this morning’s opening levels.
Euro (EUR) Under Pressure from Mixed PMI Data
The Euro (EUR) recovered modestly after closing Monday’s session below parity for the first time since 2002. The single currency is struggling for demand as both the French and German economy contracted.
Lending some moderate support is the better-than-expected Eurozone manufacturing PMI. Coming in at 49.7 versus the expected 49.0, the Euro area’s manufacturing sector eased its pace of contraction. Elsewhere, Germany also saw slightly improved PMI data. Europe’s biggest economy edged slightly higher and broke the streak of three months of contraction.
Meanwhile, the services industry across the Euro area all recorded further slowdowns in preliminary PMIs. A fourth consecutive slowdown softened the services sector to its lowest levels since April 2021. The cost-of-living pressures continue to weigh heavily on the industry.
Elsewhere, the Euro will continue to be under increased pressure as wholesale energy prices skyrocketed. Russia has announced it would completely halt natural gas supplies via the Nord Stream 1 pipeline. Maintenance reasons are cited, as the pipeline will be closed for three days at the end of the month.
US Dollar (USD) Undermined by Improving Global Market Sentiment
The US Dollar (USD) is seeing mixed success against its rivals today as safe-haven flows slowed amid a somewhat improving global market sentiment. Expectations of fading inflationary pressures are inspiring a risk-on market mood.
Meanwhile, lending support to the ‘Greenback’ is the growing expectation of further interest rate hikes from the Federal Reserve. A Reuters poll published on Monday showed that economists supported another 0.5% rate hike at the next policy meeting.
Recent hawkishness from Fed policymakers also hinted at further interest rate hikes. With more speeches planned this week, the US Dollar could see renewed strength if the Fed continue their hints at further tightening.
Euro US Dollar Forecast: US PMI Data to Lift on the Euro?
Looking ahead to the rest of today’s session and the US Dollar could experience downward pressures. The release of US PMI data could tip the US into a technical recession. With service PMIs set to show a slight improvement from the downwardly revised 47.3 from last month, if forecasts miss an expected 49.2, then the US Dollar could dip.
Elsewhere, a speech from European Central Bank (ECB) member Fabio Panetta could influence the Euro as the markets digest the latest flurry of mixed PMI data from the Eurozone.