Euro US Dollar Exchange Rate Wavers amid Global Slowdown Fears
The Euro US Dollar (EUR/USD) exchange rate is trading erratically as global market sentiment fluctuates amid downbeat economic data.
At time of writing the EUR/USD exchange rate is trading around $0.9968, relatively unchanged from this morning’s opening levels.
Euro (EUR) Undermined by Downbeat Construction PMI
The Euro remains under pressure as the Eurozone construction sector contracts for the sixth straight month.
The S&P Global construction PMI fell to 44.9 in October from 45.3, marking six consecutive months of tumbling output. The housing sector diminished the most since May 2020, and commercial projects fell equally as fast. New orders dropped for the seventh consecutive month, and the quickest pace for over two years.
Further weighing on the Euro is the continued policy divergence between the European Central Bank (ECB) and other central banks. The Euro shed most of its momentum from last week as ECB Governing Council member Francois Villeroy de Galhau commented that they were not far behind the neutral rate. Further indications of the ECB slowing their rate hike policy could see the Euro slide further.
US Dollar (USD) Muted ahead of Midterms
Meanwhile, the US Dollar is failing to capitalise on the waning global market sentiment and struggles to find its previous week’s form.
With China quashing rumours of a supposed relaxing of their strict zero-Covid policy as authorities, global market sentiment has taken a hit. Chinese authorities have reaffirmed their stance on combating Covid as infections hit their biggest daily rise in six months. Elsewhere, the latest economic data from China is also weighing on risk sentiment. A much smaller-than-expected rise in the trade surplus points to a weakening global demand.
Elsewhere, the mid-term elections are approaching, and investors are becoming concerned with the possible outcomes. Economists at DBS Bank warn that if the Democrats lose control of one or two houses of Congress, the economy could take a hit. They said:
‘The Republicans will push for spending cuts in Social Security and Medicare in exchange for increasing or suspending the debt ceiling limit. The Biden administration warned that failure to do so would lead to a US debt default.’
Lending some modest support to the US Dollar is Fed Chair Jerome Powell reassuring investors that peak interest rates will have to climb higher than previously thought to combat inflation.
Euro US Dollar Forecast: Fed Speeches to Rally the Greenback?
Looking ahead, the Euro US Dollar exchange rate could see further movement when several key Fed policymakers are set to speak at events later today. A continued hawkish rhetoric could see the ‘Greenback’ climb.
Meanwhile, ECB President Christine Lagarde is due to release a pre-recorded speech today that isn’t expected to make any comments on monetary policy. But any hints towards the central bank’s next move could influence the single currency.