Euro (EUR) Exchange Rate Outlook Gloomy Despite Uptick in German Production
The Euro US Dollar (EUR/USD) exchange rate’s struggle could be set to continue this week, with the recent barrage of upbeat US data pulses not expected to let-up.
This is largely due to the ongoing economic optimism in the US – with a tightening labour market, accelerating inflation and steadily increasing economic growth positioning the US Federal Reserve as the far more hawkish option compared to the European Central Bank (ECB).
There was some good news for the bloc, however, with Germany’s run of disappointing ecostats finally coming to an end today with the release of the German industrial production results for March.
According to the Federal Statistics Office, industrial production in Germany rebounded after the drop in February, climbing by a whopping 3.2% year-on-year, up from the previous score of 2.6% and the forecast of 3.0%.
This climb was largely driven by an accelerated rise in the production of high-ticket items and – marking a four-month high – served to put an end the flood of tepid data from Germany in the past few months.
US Dollar (USD) Exchange Rates Supported Ahead of US Inflation Results
The market focus this week for the Euro US Dollar (EUR/USD) exchange rate will be the latest US consumer price inflation readings, US jobless claims and average earnings figures, with the small rise in consumer prices over April expected to keep the US Federal Reserve on track to raising interest rates in June.
These figures are all expected for release on Thursday.
In other news, US Fed Chairman Jerome Powell made some interesting statements on monetary policy this morning, remarking at a finance conference in Zurish that the Fed’s actions in raising interest rates should not surprise markets or upend the global economy.
Powell stated:
‘There is good reason to think the normalisation of monetary policies in advanced economies should continue to prove manageable for emerging economies’.
This had a very minor effect on the ‘Greenback’, however, with investors already optimistic for a rate hike in June.
ECB Economic Bulletin and Outlook – What can we expect for the Euro US Dollar (EUR/USD) Exchange Rate?
Also on the radar for Euro traders this week will be Thursday’s ECB economic bulletin release – a presentation of the economic and monetary information that drives the Governing Council’s policy decisions.
It is highly likely that the bulletin will reflect the central bank’s current dovish state, especially given the bloc’s poor Q1 GDP growth and continually subpar inflation results.
If this is indeed the case then it would reiterate what is largely known by the markets; that the ECB could be set to extend their bond-buying scheme beyond September 2018 and that a rate hike isn’t on the table anytime soon.
This outlook could leave the EUR/USD exchange rate floundering in the near-term.
Comments are closed.