Euro US Dollar (EUR/USD) Exchange Rate Fluctuates with Eurozone Economy Close to Stagnation
The Euro US Dollar (EUR/USD) exchange rate has fluctuated today and is currently trading at an inter-bank rate of $1.1351.
Data released from the Eurozone this morning shows that growth in the bloc remains muted due to the decline in manufacturing.
The flash Eurozone manufacturing PMI plummeted to a 68-month low in January, falling below the 50 mark separating growth from contraction at 49.2.
Commenting on the data release Chief Business Economist at IHS Markit Chris Williamson stated:
‘The Eurozone economy remained close to stagnation in February. The flash PMI lifted only slightly higher during the month, continuing to indicate one of the weakest rates of expansion since 2014. The survey data suggests that GDP may struggle to rise by much more than 0.1% in the first quarter.
‘Germany is on course to grow by 0.2%, buoyed by its service sector, but France looks set to stagnate or even contract very slightly. The rest of the region is meanwhile suffering its worst spell since late-2013, with growth having slipped closer to stalling in February.’
Earlier: Euro (EUR) Slides as German Manufacturing Contracts
There was further disappointing data from Germany, the largest member of the Eurozone.
Although flash PMI data showed that Germany’s services PMI rose to a five-month high of 55.1, and the composite PMI rose to 52.7 (a four-month high) the manufacturing sector in Germany contracted, with the PMI falling to a 74-month low of 47.6.
Commenting on the data, Principal Economist at IHS Markit Phil Smith noted:
“Germany’s manufacturing and service sectors remain on very different paths, according to February’s flash PMI data.
“[…] The manufacturing PMI fell further into contractionary territory in February to its lowest in over six years, with sustained robust job creation at factories the only positive takeaway. The strength in employment is perhaps surprising given the order book situation and lack of pressures on capacity, but goods producers are seemingly looking through the current soft patch in demand.”
Yesterday: US Dollar (USD) Buoyed by Potential for Interest Rate Hike
The EUR/USD exchange rate was left struggling yesterday as the FOMC policy meeting minutes indicated that the Fed is leaving the door open to further rate hikes.
The minutes showed that US Federal Reserve officials remained divided over what it would take for them to raise interest rates.
It was noted that ‘several’ policymakers noted ‘if the economy evolved as they expected, they would view it as appropriate to raise the target range for the federal funds rate later this year.’
This was counteracted by another group of policymakers who ‘argued that rate increases might prove necessary only if inflation outcomes were higher than in their baseline outlook.’
However, there was not any discussion on the subject of cutting interest rates, which was taken as a positive.
EUR/USD Outlook: Will the Euro Slide on Stagnating German GDP?
The Euro US Dollar (EUR/USD) exchange rate could see movement this afternoon as the US Markit PMIs are due for release.
The US manufacturing PMI is forecast to shower growth, slipping from 54.9 to 54.7, which could cause sentiment for the ‘Greenback’ to slide.
However, both the services and composite PMI figures are forecast to show an improvement.
Looking ahead to tomorrow, the Euro could slip following the release of the German GDP figures.
The forecast suggests that GDP stagnated in Q4 2018, which will likely dampen sentiment for the single currency.
The Euro could see further disappointment in the form of the Consumer Price Index if core inflation stagnates rather than rises the 0.1% forecast.
