The Euro to US Dollar (EUR/USD) exchange rate softened by around -0.34% on Wednesday. This can be attributed to the Dollar making gains as traders speculate that the Federal Reserve will end their use of dovish language when describing the timing of a rate hike. The common currency, meanwhile, is subject to changes in foreign currency movement ahead of Eurozone inflation data.
The Euro to US Dollar exchange rate is currently trending in the region of 1.2469.
Yesterday…
Euro to US Dollar (EUR/USD) Exchange Rate Extends Advance, EUR/GBP Trims Gain
As the European session progressed the Euro to US Dollar (EUR/USD) exchange rate extended and consolidated gains as US housing starts and building permits figures fell short of forecasts.
US building permits dropped by -5.2%, more than twice the -2.5% decline anticipated.
Meanwhile, housing starts slid -1.6% on the month in November, defying expectations for an increase of 3.1%.
The Euro to US Dollar exchange rate achieved a high of 1.2570.
The Euro to US Dollar exchange rate was later supported by a weaker-than-forecast US Markit Manufacturing PMI. The gauge of the US manufacturing sector moved closer to the 50 mark separating growth from contraction in November, easing from 54.8 to 53.7.
However, the Euro to Pound Sterling (EUR/GBP) exchange rate declined from the day’s high as investors bet that the easing in UK inflation will be beneficial for consumers.
Earlier…
Both the Euro to US Dollar (EUR/USD) and Euro to Pound Sterling (EUR/GBP) exchange rates were trending in a stronger position during Tuesday’s European session.
EUR/USD Exchange Rate Climbs as Eurozone PMI Gains
The Euro to US Dollar (EUR/USD) exchange rate climbed by over 0.5% during local trading as investors responded to surprisingly upbeat reports from the Eurozone and its largest economies.
German Services PMI may have come in below forecast, and French Manufacturing PMI may have fallen further into contraction territory, but the Eurozone’s Manufacturing/Services/Composite measures all registered above expected levels.
Eurozone manufacturing PMI climbed from 50.1 to 50.8 in December while the region’s services PMI advanced from 51.1 to 51.9. These improvements took the composite measure to 51.7 from 51.1.
Although the majority of the results were better-than-expected, the data saw market economist Chris Williamson comment; ‘On one hand, the upturn in the PMI supports the view that the ECB’s stimulus is starting to take effect and that more time is needed to assess the impact of current measures. On the other hand, the disappointing rate of expansion, and especially the weakness evident in Germany and France, will add to calls for additional stimulus to be sanctioned without further delay.’
Further Euro to US Dollar (EUR/USD) strength was derived from the fact that the German and Eurozone ZEW Economic Sentiment Surveys showed a marked improvement in December.
The gauge of German confidence leapt from 11.5 to 34.9 in December while the Eurozone’s confidence index climbed from 11 to 31.8.
Euro to Pound Sterling (EUR/GBP) Exchange Rate Higher as UK Inflation Slows
The Euro to Pound Sterling (EUR/GBP) exchange rate also advanced on Tuesday, climbing to a high of 0.8006 as the UK’s Consumer Price Index registered a sharper-than-anticipated slide in inflation.
The annual rate of inflation slumped to 1.0% in November, down from 1.3% in October and much lower than the reading of 1.2% anticipated.
The Bank of England (BoE) had previously warned that the pace of inflation could slow below 1% in the near future, and this result supports that proposition.
Results from the BoE’s banking stress test also piled pressure on the Pound.
Today’s Euro to US Dollar (EUR/USD) Exchange Rate Forecast
Before the close of trade further Euro to US Dollar (EUR/USD) exchange rate movement could be caused by the US Markit Manufacturing PMI for December.
If the index shows the improvement expected, the US Dollar could defend itself against the Euro’s advance.
US building permits and housing starts figures will also be of interest.
The Euro to US Dollar exchange rate is currently trending in the region of 1.2490
The Euro to Pound Sterling exchange rate is currently trending in the region of 0.7954
