The Euro US Dollar (EUR USD) exchange rate trended higher this morning as the Eurozone Manufacturing PMI rose in line with expectations.
Euro (EUR) Bolstered by Uptick in Manufacturing PMI
The Euro pulled itself slightly higher this morning following a reported rise in factory activity across the Eurozone.
According to Data published by IHS Markit the Eurozone Manufacturing PMI jump from 56.6 to 57.4 in August, matching a six-year high struck in June and helping to bolster confidence that the bloc’s economy is continuing its rapid pace of expansion in the second half of the year.
Chris Williamson, Chief Business Economist at IHS Markit said;
‘The eurozone’s impressive manufacturing upturn regained momentum in August, with a summer surge in factory activity suggesting rising goods production will support another strong GDP reading in the third quarter.’
However the Euro’s gains were tempered somewhat by concerns that the latest jump in activity may not necessarily translate into higher wages for workers, something that is likely to remain a concern for the European Central Bank (ECB) as it meets next Thursday.
US Dollar (USD) Weakened as Inflation Data Misses
Meanwhile the US Dollar slipped from its best levels yesterday as softer than expected inflation data dampened hopes of an additional interest rate hike from the Federal Reserve later this year.
Market sentiment dipped as the US released its latest PCE inflation figures, which saw core inflation dip from 1.5% to 1.4% in July, its lowest level in 17-months.
With soft inflation in the US being a major bugbear for the Fed in recent months, yesterday’s data did little to increase optimism that the bank will follow through with its plans for a third rate hike by the end of 2017, with odds of a December hike currently at just 36% according to CME’s FedWatch tool.
EUR USD Forecast: US Payroll Data to Beat Expectations?
Looking ahead the EUR USD exchange rate may tumble again later this afternoon if today’s US Non-farm Payroll’s data beats expectations.
While initial estimates for today’s payroll figures suggest that the number of jobs added by the private sector will have fallen in August, a sharp uptick in ADP employment figures earlier in the week has led to some speculation that payrolls numbers may have also risen last month.
Meanwhile EUR investors are likely to turn their attention towards next week’s ECB meeting as they begin to speculate on the possibility of the bank discussing plans to begin tapering its quantitative easing programme.
Current Interbank Exchange Rates
At the time of writing the EUR USD exchange rate was trending around 1.1899 and the USD EUR exchange rate was trending around 0.8401.
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