EUR/USD Exchange Rate Rangebound as Eurozone Economic Woes Weigh on Euro
The Euro US Dollar (EUR/USD) exchange rate steadied at around $1.105 today after July’s Italian industrial output eased on the month from -0.3% to -0.7%. Italian year-on-year industrial output also fell by -0.7%.
Today also saw July’s French industrial production figure for July increased by 0.3%, but these undershot forecasts and left Euro traders jittery as the Eurozone’s economy continues to falter.
Analysts at Reuters were downbeat about the bloc’s economic health:
‘The weaker-than-expected French data follows an unexpected fall in German industrial output in July that added to signs struggling manufacturers could tip Europe’s largest economy into a recession.’
Meanwhile, uncertainties surrounding US-China trade relations are also continuing to drag on market confidence in the European currency.
Any indications of a flare-up between these two superpowers would dent the Eurozone’s economy, further pulling it closer to a technical recession in the third-quarter.
USD/EUR Exchange Rate Flat as Fed Rate Cut Fears Haunt US Markets
The US Dollar (USD) has continued to remain under pressure ahead of expectations of a rate cut from the Federal Reserve next week. This follows the decline in August’s New York Fed’s consumer inflation expectations, which eased from 2.59% to 2.41% on Monday.
Analysts are Reuters were downbeat, saying:
‘The U.S. economy is producing an inflation rate persistently short of the Fed’s 2% goal. Officials are divided on whether a rate cut is needed at a time when the unemployment rate is near a 50-year low and consumer spending is strong.’
Today also saw the release of August’s US NFIB small business optimism figure which eased from 104.7 to 103.1, further adding bolstering concerns for the health of the US economy.
EUR/USD Outlook: Could the Euro Benefit from a UK Brexit Breakthrough?
US Dollar investors will be awaiting tomorrow’s release of August’s producer price index, which is expected to rise from 2.1% to 2.2%.
However, ‘Greenback’ traders are feeling increasingly jittery ahead of Thursday’s publication of the US inflation figures for August, which are expected to ease. As a result, this could bolster reasons for the central bank to slash its interest rates next week.
Thursday will also see the publication of the US jobs figures.
Due to an empty economic calendar for the Eurozone tomorrow, the EUR/USD exchange rate is likely to be driven by political developments surrounding the UK’s Brexit.
Any indication that British Prime Minister Boris Johnson could forge a compromise on the Irish backstop would prove EUR-positive, as this would lessen the likelihood of a no-deal on October 31, the Brexit deadline.