EUR/USD Exchange Rate Eases Despite ‘More Settled Backdrop on International Stage’
The Euro US Dollar (EUR/USD) exchange rate dipped today, with the pairing currently trading around $1.119 after Germany’s Markit Manufacturing PMI for December failed to emerge from contraction territory at 43.7.
Phil Smith, Principal Economist at IHS Market offered reasons for hope, however, saying:
‘Importantly, however, the forward-looking survey measures for new orders and output expectations both give off more positive signals as we move into the new year. What’s more, the US-China ‘phase one’ trade deal and a potentially clearer path to Brexit make for a more settled backdrop on the international stage.’
Today also saw the publication of the Eurozone’s Manufacturing PMI for December, which also remain firmly mired in contraction territory at 46.3.
Duncan Brock, Group Director at the Chartered Institute of Procurement and Supply, was downbeat in his analysis:
‘The pace of manufacturing’s decline in December will set alarm bells ringing as production levels sank at their fastest levels since July 2012 and with no sign of immediate recovery in sight.’
The Eurozone’s manufacturing sector has continued to shrink for 11 months straight, leaving many Euro investors feeling jittery at the beginning of 2020.
USD/EUR Exchange Rate Edges Higher as US Initial Jobless Claims Beat Forecasts
The US Dollar (USD) rose following today’s release of the US Initial Jobless Claims figure for December, which beat forecasts despite a lowering trend.
As the US labour market continues to show improving strength, American markets have reacted positively on renewed hopes in consumer spending, which could see the US economy follow a moderate growth path in the year ahead.
Meanwhile, US-China trade developments remain in focus, with some ‘Greenback’ traders feeling increasingly optimistic that tensions between the world’s two largest economies could ease after the 15th January, when the ‘phase one’ trade deal is expected to be signed off.
Shehzad Qazi, Analyst at the economic observatory China Beige Book, recommended caution, however, saying:
‘The deal will ultimately be weighed in terms of how much it does to address structural issues like intellectual property and market access.
‘The push for financial decoupling and, of course, the larger technological competition are also all here to stay. Trump’s trade war may have been the opening salvo of a long drawn conflict.’
EUR/USD Outlook: Could the ‘Greenback’ Sink as Traders Seek Out Riskier Assets?
Euro (EUR) investors will be looking ahead to tomorrow’s publication of the flash German inflation figure for December, which is expected to rise from 1.2% to 1.4%. As a result, we could see the EUR/USD exchange rate improve as optimism over the bloc’s economy rises.
US Dollar (USD) traders, meanwhile, will be awaiting tomorrow’s release of the US ISM Manufacturing PMI for December, with any signs of improvement, or a leap out of contraction territory, benefiting the ‘Greenback’.
US-China trade developments will continue to drive the EUR/USD exchange rate, however, with any signs of improving relations between the two superpowers likely seeing the safe-haven demand for the ‘Greenback’ slipping, with traders seeking out riskier assets instead.