Euro to US Dollar Exchange Rate Fluctuates amid Mixed PMI Data and Safe Haven Demand
As uncertainties about US trade protectionism worsened again this week, the Euro to US Dollar (EUR/USD) exchange rate has spent most of the week trending lower. EUR/USD has avoided falling closer to its worst levels though, thanks to some decent Eurozone data.
EUR/USD may be on track to see another week of minimal movement. After opening this week at the level of 1.1605, EUR/USD briefly edged higher before falling to a low of 1.1535.
EUR/USD has been trending between those two levels since and trended near the level of 1.1580 at the time of writing on Wednesday.
Persistent market demand for safe haven currencies like the US Dollar (USD) have kept the Euro to US Dollar exchange rate from advancing, and the US Dollar has been supported by some strong US data too.
Ultimately though, investors are hesitant to sell the Euro much further against the US Dollar as Eurozone data remains generally optimistic.
Euro (EUR) Exchange Rates Find Limited Support in Eurozone PMI Stats
The Euro (EUR) was able to avoid further losses against the US Dollar on Wednesday, as the Eurozone’s latest PMI stats were decent enough to help the shared currency to hold its ground.
Markit’s final August services and composite PMI stats were mixed, and even fell short of forecasts in major economies like France and Germany, but the overall Eurozone results were decent.
The Eurozone’s services PMI edged higher from 54.2 to 54.4 as forecast, and the overall composite PMI actually beat forecasts of 54.4 by climbing from 54.3 to 54.5.
Still, despite the slightly better-than-expected composite figure, the report indicated that optimism in the Eurozone is lowering due to global political uncertainties and trade tensions. According to Markit’s report:
‘The survey data for the third quarter so far suggest the single currency area is on course to at least match the 0.4% expansion of GDP seen in the second quarter, yet the downturn in optimism raises questions over whether this pace of growth can be sustained into the fourth quarter.’
On top of the uncertainties about optimism, the Euro’s strength was limited due to July’s Eurozone retail sales report. The yearly retail sales figure was forecast to have slipped to 1.3%, but instead fell to just 1.1%.
US Dollar (USD) Exchange Rates Remain Appealing amid Market Safe Haven Demand
Since last week, the brief period of risk-on movement in markets quickly wore off and investors once again began to buy safe haven currencies like the US Dollar.
The US economic outlook is sturdy, with the Federal Reserve expected to keep hiking US interest rates gradually over the coming year and US ecostats still printing strongly.
As a result, the US Dollar has been one of the most consistently appealing safe haven currencies, even amid concerns about US trade protectionism.
The primary cause of the US Dollar’s resilience has been safe haven demand, but this week’s US data has been impressive this week too and has only helped the US Dollar keep pressure on the Euro.
Tuesday saw the publication of ISM’s August manufacturing PMI for the US. The figure was forecast to slip from 58.1 to 57.7, but instead climbed to 61.3.
Euro to US Dollar (EUR/USD) Forecast: Eurozone Growth and US Non-Farm Payroll Data in Focus
While market risk-sentiment and demand for safe haven currencies is likely to remain the primary drive of the Euro to US Dollar (EUR/USD) exchange rate for the rest of the week, upcoming datasets could prove highly influential too.
The Euro is unlikely to weaken much unless the US Dollar sees a notable rise in demand, as investors will be hesitant to bring EUR/USD too close to its worst 2018 levels without good reason.
Thursday’s US data is unlikely to be hugely influential unless it is disappointing enough to weaken US Dollar demand. US ADP employment data, and ISM’s US non-manufacturing PMI from August, will be published during Thursday’s American session.
Friday’s session is much more likely to be influential, as the Eurozone’s key Q2 Gross Domestic Product (GDP) growth rate update will be published and US Non-Farm Payroll results from August will come in too.
If Eurozone growth beats forecasts, this could help the Euro to US Dollar (EUR/USD) exchange rate to put in a more solid recovery. Poor Eurozone growth or strong US Non-Farm Payroll data could cause some late-week EUR/USD losses though.
