EUR/USD Exchange Rate Rangebound as ECB Growth Concerns Increase
The Euro US Dollar (EUR/USD) exchange rate steadied today, leaving the pairing fluctuating around $1.112.
The Euro (EUR) steadied against the US Dollar (USD) despite rising concerns ahead of this Thursday’s release of the Eurozone’s growth figures for the second-quarter.
As the Eurozone’s manufacturing sector continues to struggle, with the European Central Bank President Mario Draghi commented that its outlook is becoming “worse and worse”, analysts are expecting signs of a weakening in the bloc’s growth.
Petr Krpata, a Financial Strategist at ING, was downbeat, saying:
‘The hard Eurozone data releases this week should further cement the ECB’s dovish guidance from last week and justify the case for a likely package of easing measures in September. [Also] [s]uch soft Eurozone data should be at odds with solid US data this week.’
USD/EUR Exchange Rate Flat as US Markets Brace for Fed Developments
US Dollar (USD) traders are becoming increasingly ahead of the Federal Reserve’s likely interest rate cut on Wednesday – its first since 2008.
Reuters said:
‘Spooked by a global economic slowdown, the U.S. Federal Reserve is seen launching on Wednesday its fifth interest rate-cutting campaign since 1995. It will come despite many signs of strength in the U.S. economy.’
‘Policymakers at the U.S. central bank have made clear they think the nation’s labor market looks pretty solid. Some have said the Fed may cut rates just once this time.’
The Federal Open Market Committee (FOMC) is expected to vote to cut interest rates, although as the US economy shows continued momentum, it is unlikely we will see any further cuts in the near future.
US-China trade talks are once against in focus, with discussions due recommence on Tuesday and Wednesday.
Talks are expected to become tense however, with Commerce Minister Zhong Shan is to join the Chinese negotiation team, who is perceived as a Communist hardliner.
EUR/USD Outlook: US Spending Figures in Focus
Euro traders will be looking ahead to tomorrow’s release of the year-on-year flash German inflation figures for July.
These are expected to ease from 1.5% to 1.3%.
US Dollar will be awaiting tomorrows US spending figures for June.
These will be followed by the US home sales figures for June, which are expected to fall from 1.1% to 0.5%.
Any marked falls in tomorrow’s figures could cause EUR/USD exchange rate to sink as US markets become jittery ahead of the Federal Reserve’s rate statement, as this could indicate a weakening in the economy.