Euro US Dollar (EUR/USD) Subdued amid Mixed Eurozone Data
The Euro US Dollar (EUR/USD) exchange rate is muted today as it struggles to consolidate the week’s gains.
At the time of writing the EUR/USD exchange rate is trading at $1.0824, virtually unchanged from this morning’s opening rate.
Euro (EUR) Wavers amid Mixed German Data
The Euro (EUR) is trading without a clear direction today following bleak German GDP data and an upbeat Ifo business climate reading.
The German economy shrank by 0.3% in the fourth quarter of 2023, the latest GDP data reports this morning. With a bleak growth outlook for the Eurozone’s largest economy, the European Central Bank (ECB) faces renewed pressure today to begin loosening monetary policy, in order to minimise the risks of a technical recession for both Germany and the wider Euro bloc.
However, an upbeat reading from Germany’s Ifo business climate indicator may serve to cushion EUR’s losses as the session continues. The report edged higher to 85.5 in February as forecast, though remained little changed from January’s three-and-a-half-year low.
Improving economic sentiment might lend EUR some modest support as the session progresses, though the main trading impetus for EUR today centers around Germany’s recession woes.
US Dollar (USD) Muted amid Data Lull
The US Dollar (USD) is quiet today as the week draws to a close with a data-light session for the US.
Amid a lack of fresh economic data, overnight commentary from Federal Reserve policymaker Christopher J Waller is serving to keep the ‘Greenback’ afloat. Waller maintained that the central bank requires more inflation data before any significant changes to monetary policy can be enacted, to ensure that US inflation is continuing to trend downwards, towards the Fed’s 2% target.
As one of the Fed’s more hawkish rate-setters, Waller stated:
‘I am going to need to see at least another couple more months of inflation data before I can judge whether January was a speed bump or a pothole. In the absence of a major economic shock, delaying rate cuts by a few months should not have a substantial impact on the real economy in the near term. I think I have shown that acting too soon could squander our progress in inflation and risk considerable harm to the economy.’
Euro US Dollar Exchange Rate Forecast: ECB Speech to Boost the Euro?
Looking ahead, markets may expect thin trading conditions going into the afternoon, with a lack of Eurozone and US data due out for the remainder of the session. This may leave the currency pairing to trade on risk appetite, with investors potentially buying the dip in the US Dollar, in the wake of yesterday’s risk rally which dented the safe-haven USD’s exchange rates.
Early next week, a speech from ECB President Christine Lagarde could drive movement for the common currency. Should Lagarde strike a hawkish tone during her address, the Euro may garner investor interest amid speculation that the central bank could keep monetary policy restrictive for a prolonged period.
However, following today’s bleak GDP reports, concerns that Germany could drag the wider Eurozone into a technical recession may see the central bank discussing interest rate cuts, which in turn could dent EUR.
