EUR/USD Exchange Rate Edges Higher as ECB Holds Interest Rate
The Euro US Dollar (EUR/USD) exchange rate rose today and is currently trading around $1.1267 on the interbank market.
The Euro (EUR) edged higher against the US Dollar (USD) following the publication of the Eurozone’s GDP figures for the first quarter, which held steady at 0.4%, confirming its estimate.
Today also saw the printing of the German factory orders figures for April, which came in above forecast at a 0.3%, reassuring some single currency traders as Europe’s largest economy shows signs of recovery.
The European Central Bank (ECB) also announced its interest rate decision today, which held steady at 0% – leaving most single currency traders unsurprised. The ECB added that it expects to leave its rates and these historic lows until mid-2020.
The US Dollar (USD), meanwhile, failed to make any gains on the single currency, as the trade war between the US and Mexico has failed to meet a consensus, while President Donald Trump is continuing to escalate threats against China, hinting at new duties.
Robert Koopman, the Chief Economist at the World Trade Organisation, commented:
‘We’re seeing a fair amount of what we call trade diversion, where economic activity is moving away from … the parties that are in conflict: The U.S. and China.’
USD/EUR Exchange Rate Falls as US Trade Balance Weakens
The US Dollar weakened further following the worse-than-expected US trade balance figures for April, which came in at $-50.8bn.
These were followed by the US nonfarm productivity figures for the first quarter, which also fell below consensus.
The ongoing US-China trade war is also weighing on market confidence in the ‘Greenback’, following Mr Trump’s comments of a possible raise in tariffs up to $300bn.
Trump exacerbated tensions between the two superpowers, saying:
‘Our talks with China, a lot of interesting things are happening. We’ll see what happens… But I think China wants to make a deal and I think Mexico wants to make a deal badly.’
EUR/USD Outlook: Euro Could Rise on UK Brexit Breakthrough
US Dollar traders will be looking ahead to tomorrow’s publication of the US nonfarm payrolls figures for May, and with any improvement this could provide some uplift for the ‘Greenback’.
These will be followed by the US average hourly earnings figures for May, which, however, are expected to remain unmoved at 3.2%.
Euro investors, meanwhile, will be looking ahead to tomorrow’s German industrial production figures for April, which are set to decrease and potentially weakening the single currency.
Global trade tensions will remain in focus for both EUR and USD traders tomorrow, and any signs of increasing divisions between the US and China could have investors fleeing to the single currency safe-haven.
The EUR/USD exchange rate will be dictated by political developments towards the end of this week, and with any signs of a breakthrough in the UK regarding Brexit, this could edge the pairing higher.