Euro US Dollar Exchange Rate Weakens on Disappointing German Data
The Euro US Dollar (EUR/USD) exchange rate is trading lower today, in response to a lacklustre German factory orders print.
At the time of writing, the EUR/USD exchange rate is trading at around $1.0600, down roughly 0.2% from today’s opening levels.
Euro (EUR) Loses Ground as German Factory Orders Nosedive
The Euro (EUR) is falling against the US Dollar (USD) after the latest German factory orders missed forecasts.
In March, new orders within the manufacturing industry fell for a second consecutive month, contracting by 4.7%. This was down from an upwardly revised 0.8% slump in February and well below the 1.1% decline that was forecast.
The Ukraine crisis is largely responsible for the weak performance having caused supply chain disruptions and soaring energy bills.
Furthermore, as Russia’s invasion of Ukraine continues to dominate markets, the EU’s latest sanctions package against Moscow is also stifling demand for the single currency.
On Wednesday, European Commission President Ursula von der Leyen announced plans to phase out Russian crude oil within the next six months.
However, this has been met with some push back from Hungary as it will ‘ruin the Hungarian economy’ according to Hungarian government spokesman, Zoltan Kovacs.
Moreover, because Russia supplied Europe with almost 25% of its oil imports last year, Kremlin spokesman Dmitry Peskov believes the sanctions are a ‘double-edged sword’.
As the EU seeks new oil suppliers, the proposed ban is stoking uncertainty across the bloc and unnerving EUR investors. In turn, this is placing pressure on the single currency’s appeal.
US Dollar (USD) Enjoys Tailwinds from Hawkish Fed
The US Dollar (USD) is climbing against the Euro (EUR) today as a result of the Federal Reserve’s latest interest rate decision.
Last night, the Fed hiked interest rates from 0.5% to 1% as predicted. This was the biggest interest rate hike since 2000 as the Fed seeks to calm inflationary pressures in the US.
The ‘Greenback’ initially plummeted by almost 1% after Fed Chair Jerome Powell stated that ‘a 75-basis point increase is not something that the committee is actively considering.’ Disappointing USD bulls who had already begun pricing in a more aggressive rate hike in June.
However, Powell reiterated there was ‘a broad sense on the committee that additional 50 basis-point increases should be on the table for the next couple of meetings.’
This enabled the US Dollar to quickly recover its losses as the prospect of several more rate hikes this year buoyed US Treasury yields and underpinned USD demand this morning.
Euro US Dollar Forecast: Ukraine Crisis to Remain in Limelight
Looking ahead, the Euro US Dollar could face fresh volatility amidst the ongoing war in Ukraine.
As the conflict rages on, it continues to place pressure on the single currency, as it threatens to undermine activity in the Eurozone economy.
On the data front, Germany’s latest industrial production figures may place additional pressure on EUR exchange rates. Production growth is expected to slip from 0.2% to -1% in March.
On the other hand, the ‘Greenback’ may be bolstered by the latest non farm payroll data. In April, the figures are forecast to drop slightly from 431K to a still impressive 391K.
Meanwhile, demand for the US Dollar may be further heighted by April’s US unemployment figures: the jobless rate is predicted to have decreased from 3.6% to 3.5%.