Euro US dollar (EUR/USD) ticks down amid lack of data
The euro US dollar (EUR/USD) exchange rate is falling this morning as markets await high-impact US data, due for release this afternoon.
At the time of writing the EUR/USD exchange rate is trading at $1.1041, down approximately 0.2% from this morning’s opening rate.
Euro (EUR) wobbles amid lack of data
The euro (EUR) is facing headwinds this morning with fresh Eurozone data in short supply.
Amid an absence of fresh releases, the bloc’s recent wave of disappointing data is pulled into view.
Easing price pressures and persistently weak growth in the bloc’s largest economy, coupled with slowing inflation across the region, have kept the EUR under pressure in recent days.
The downbeat data suggests that the European Central Bank (ECB) could be lagging in cutting interest rates and buffering economic expansion, which in turn strengthens the argument for more frequent and rapid rate reductions, according to analysts.
Recent comments from ECB policymaker Isabel Schnabel indicated that with inflation easing rapidly across the Eurozone, the bank will likely adjust its monetary policy to reflect the cooling price pressures.
Schnabel remarked:
‘Monetary policy should remain focused on bringing inflation back to our target in a timely manner. While risks to growth have increased, a soft landing still appears more probable than a recession.’
Additionally, a deteriorating market sentiment is helping to keep the safe-haven euro afloat, as investors shy away from riskier currencies.
US Dollar (USD) muted ahead of PMI
The US dollar (USD) is trading without a clear direction this morning ahead of some market-moving US data, due for release this afternoon.
While the ‘greenback’ managed to recoup some of its losses in recent days after exiting oversold conditions, investors now appear largely hesitant to place any further aggressive bets on the US dollar prior to the latest American ISM manufacturing PMI, due for release this afternoon.
While Federal Reserve interest rate cut bets have surged in recent weeks, signs that continually restrictive Fed monetary policy serves to stymie US private sector growth may fuel further expectation of an aggressive policy-easing cycle by the bank in the coming months, in turn hampering USD this afternoon.
Analysts at ING commented:
‘The slack in the manufacturing sector has been priced in for a while, and we’ll probably need to see a rather soft number to trigger recession alarms and drive the dollar materially lower. The consensus is looking at a modest improvement in August, from 46.8 to 47.5.
Consensus expectations are for a decline from 52.9 to 52.0, which should feed into the Fed’s and the market’s conviction call on disinflation.’
Amid an increasingly dovish outlook by the Federal Reserve, could signs of continual weakness in the vital American manufacturing sector fuel expectation of an aggressive policy-easing cycle by the central bank, thereby pressuring USD exchange rates later today?
In the meantime, a deteriorating market sentiment may serve to buoy the US dollar this morning, due to its safe-haven status.
Euro US dollar exchange rate forecast: American manufacturing PM in focus
Looking ahead, the latest US ISM services PMI will likely be the core catalyst of movement in the euro US dollar exchange rate this afternoon. Should the release confirm ongoing contractions in the key sector, USD may sink against its rivals.
Looking to the Eurozone, a data-light afternoon could see the single currency trade on its negative USD correlation, with any weakness in the ‘greenback’ likely to lift EUR.
