- Euro US Dollar Falls to 1.1937 – US Dollar Euro Climbs to 0.8374
- Hurricane Harvey Wreaks Havoc – North Korean Crisis Fosters Volatility
- German Inflation Data Due this Afternoon – Euro Unsteady in Anticipation
- US Consumer Confidence Beats Expectations – US Dollar Bolstered into Wednesday
The Euro US Dollar exchange rate dropped this morning in the wake of yesterday’s positive US consumer confidence reading and in anticipation of today’s US GDP and German inflation figures.
The Conference Board reported that US consumer confidence hit its second-highest level since 2000 yesterday with a print of 122.9 in August, up from July’s 120 reading and the forecast of 120.3. This result demonstrated that consumer sentiment within the US remains on strong form and gives reason to believe that consumer spending in Q3 may prove positive.
It should be noted, however, that some argue the survey results reflect a period before the devastating Hurricane Harvey and the damage it has wrought throughout Texas. Furthermore it is certainly possible that the estimated $20BN in damages caused might weigh on Q3 consumer spending.
Hurricane Harvey and Geopolitical Tensions Provoke Market Volatility for EUR USD
North Korea’s latest nuclear-capable missile launch over mainland Japan and into the Pacific Ocean caused uproar throughout the world and indeed the markets yesterday as investors hastened to move their capital to perceivably safer investments.
Traditionally the US Dollar is regarded as one of the more reliable safe-haven currencies, along with the Swiss Franc (CHF) and the Japanese Yen (JPY), this was, however, slow to occur yesterday, with market demand for the ‘Greenback’ crippled by the severity of Hurricane Harvey.
The category 4 storm and indeed the severe flooding that followed wrought havoc throughout a region of the US that contains a significant number of refineries and factories; places that are now estimated to be out-of-action for months whilst repairs are made.
Today, however, North Korea announced that it plans on having future launches, claiming that ‘Japan was the first step’ for military operations within the region. The risk aversion that resulted could also account for the US Dollar climbing back from its recent fall today, especially if the market reactions to Hurricane Harvey are soothed.
Euro Area Business Confidence Proves Positive, EUR USD Unable to Capitalise
The Eurozone received a run of positive releases today, with the most significant being a survey on business confidence, which demonstrated an increase to 1.09 in August, up from 1.05 in July. Similarly, industrial sentiment for August jumped to 5.1, up from 4.5, whilst the services sentiment reading climbed to 14.9, up from 14.2 and economic sentiment as a whole increased from 111.3 to 111.9.
The Euro, however, was not able to capitalise against the US Dollar on this positive data run due to a number of variables, notably the aforementioned spike in market risk aversion, which has left the Euro the less appetising option in this pairing.
EUR USD Forecast: German Inflation and US GDP Imminent
The Euro could also be in for some turbulence with the release of today’s German inflation figures. The preliminary estimate month-on-month figure for August is forecast to drop from 0.4% to 0.2% – a sizable fall, though it should also be noted that the year-on-year figure is actually forecast to increase from 1.7% to 1.8%, which could give EUR USD a little boost.
The 2nd estimate quarter-on-quarter GDP price index figure for the US is expected to fall from 1.3% to 1%, though the 2nd estimate growth rate as a whole is actually forecast to jump from 1.2% to 2.7%, a sizable leap that, should it occur, would push the Euro to US Dollar exchange rate even lower.
