Despite encouraging data from Germany, the euro continued its slide lower versus the US dollar on Friday. The pair skidded to a nadir of US$1.1027, roughly where it is trading at the time of writing.

Euro investors shrugged off brighter data from Germany. German exports rebounded in September, recording the biggest jump in six months. German exports increased 4.6% in September, owing to an increase in trade with other eurozone countries, the UK and US, which overshadowed a decline in trade with China. The unexpectedly strong figure provided a rare lift to Europe’s largest economy and could mean that Germany missed falling into a technical recession, at the last minute.

Germany’s GDP figures are due next Thursday. Investors and analysts will be watching closely to see whether the once powerhouse of Europe will avoid two consecutive quarters of contraction.  In the second quarter, the economy contracted 0.1%. Two straight quarters of contractions is a technical recession.

French industrial production continued to expand, reflecting France’s lesser degree of exposure to China than Germany. Job creation in France was also robust, accelerating in the third quarter as French President Macron’s labour reforms bore fruit. Usually strong data would boost the euro; however, investors overlooked the figures in favour of trade headlines.

Will US Consumer Sentiment Lift Dollar?

The dollar continued to benefit from growing optimism of a US – China trade deal. Despite mixed data and a Federal Reserve rate cut last week, the dollar has rallied over 1.2% versus the euro this week.

The dollar has put in a strong performance this week on reports that China and the US are inching closer to a trade deal. Reports that both China and the US are planning on rolling back the trade tariffs already imposed has also boosted demand for the greenback.

Dollar investors will now look ahead to University of Michigan consumer sentiment. Ihe latest update, analyst are expecting sentiment to have climbed higher in November to 95.9, up from 95.5 in the previous month. Sentiment is expected to continue its recovery underpinned by a solid labour market and strong wage growth. Analysts are not expecting to see any positive effect from improved US – China relations yet. A solid reading could boost the value of the dollar.

What do these figures mean?
When measuring the value of a pair of currencies, one set equals 1 unit and the other shows the current equivalent. As the market moves, the amount will vary from minute to minute.

For example, it could be written:

1 EUR = 1.12829 USD

Here, €1 is equivalent to approximately $1.13. This specifically measures the euro’s worth against the dollar. If the U.S. dollar amount increases in this pairing, it’s positive for the euro.

Or, if you were looking at it the other way around:

1 USD = 0.88789 EUR

In this example, $1 is equivalent to approximately €0.89. This measures the U.S. dollar’s worth versus the euro. If the euro number gets larger, it’s good news for the dollar.

 


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