EUR/USD Exchange Rate Steadies as Italy Goes into Recession after Poor GDP Figures
The Euro US Dollar (EUR/USD) exchange rate is steady today and is currently trading around $1.1491 on the inter-bank market.
EUR failed to make any gains on the US Dollar (USD) after the publication of the Eurozone’s GDP figures for the fourth-quarter continued to show a downtrend at 1.2% – leaving markets feeling wary on signs of a slowing economy.
Today also saw Italy go into recession following the publication of its Q4 GDP figures which fell to ‑0.2% after a -0.1% contraction in the third-quarter.
Claus Vistesen, the Chief Eurozone Economist at Pantheon Macroeconomics, commented:
‘Indeed, it seems to us that markets will be inclined to look at these headline [figures] as good news. They indicate that things probably won’t get much worse in the near term – this is a bold assumption, given poor January survey data – and that the ECB will keep rates low for a long time.’
Today also saw the publication of Germany’s retail sales figures for December which plummeted by ‑4.3%, further knocking confidence in the Eurozone economy.
The US Dollar, meanwhile, struggled to make any advances on the single currency after the printing of US initial jobless figures, which increased above expectation to 253K, dampening confidence in the ‘Greenback’.
These were followed by the publication of the US Chicago PMI figures for January which fell to a worse-than-expected 56.7, and bringing it closer to contraction.
USD benefited from the publication of the US new home sales figures for November which increased above expectation to 0.657M.
US Dollar Euro Exchange Rate Flat as China and US Talk Trade amid Political Tensions
The US Dollar has remained steady after the Federal Reserve froze interest rates at 2.5% yesterday, with the Chair of the Federal Reserve, Jerome Powell, following with a surprisingly dovish tone.
Powell said:
‘With the muted inflation readings we have seen coming in, we will be patient as we watch to see how the economy evolves.’
Today will see the US and China trade talks continue, with USD traders paying close attention to any developments as the relationship between the two countries has become tense recently after disputes over last year’s arrest of the telecommunications giant Huawei’s CFO.
US President Donald Trump tweeted:
Looking for China to open their Markets not only to Financial Services, which they are now doing, but also to our Manufacturing, Farmers and other U.S. businesses and industries. Without this a deal would be unacceptable!
— Donald J. Trump (@realDonaldTrump) January 31, 2019
EUR/USD Forecast: ‘Greenback’ Could Rise if US Manufacturing PMI Increases
EUR investors will be looking ahead to tomorrow’s publication of Germany’s Markit manufacturing PMI figures for January, which are expected to remain static at 49.9.
These will also be followed by the Eurozone’s manufacturing PMI figures for January, with any signs of an increase potentially providing some uplift for the single currency.
USD traders will be looking ahead to tomorrow’s US nonfarm payrolls figures for January which are expected to decrease, possibly weakening the USD/EUR exchange rate.
Following this release will be the US ISM manufacturing PMI figures for January, with any signs of a decrease potentially buoying the EUR/USD exchange rate as concerns mount over the slowing US economy.