 |
The euro US dollar exchange rate continues to hover around the flat line, neither gaining or losing on the day. The pair is holding steady above US$1.10 as investors look ahead to Federal Reserve Jerome Powell’s speech before Congress.
The euro shrugged off inline German inflation data and better than expected eurozone industrial production figures on Wednesday. The common currency barely flinched at news that German inflation remained steady at 1.1% in October, as analysts predicted and significantly below the central bank’s 2% target.
Perhaps more surprisingly the common currency had a muted reaction to industrial production output recording its second month of expansion. Industrial production increased 0.1% month on moth in September, resulting in a milder annual contraction than forecast. The data shows that the downturn in the sector is moderating. Whilst the data failed to lift the euro higher, it did prevent the euro from falling versus the dollar.
Euro investors will now look ahead to the German and Eurozone GDP’s due for release tomorrow. Germany experienced a contraction in the second quarter. After weak data across the third quarter analysts are expecting another contraction in the third quarter. Two consecutive quarters in contraction is a recession. A recession in Europe’s largest economy could prompt the European Central Bank to adopt a more dovish stance to support broader eurozone economy amid fear of contagion.
Fed Chair Powell Under The Spotlight
The dollar is edging higher on Wednesday as investors digest Trump’s latest comments on trade and look ahead to Fed Chair Powell’s testimony on Capitol Hill. President Trump provided little new insight on the progress on US — Sino trade talk. While he said that a deal could come soon, he also warned of escalating tariffs in the case that an agreement isn’t reached. The mixed message is weighing on sentiment. In a risk off environment the safe haven dollar is advancing.
Attention will now turn towards Federal Reserve Chairman Jerome Powell who will speak before Congress later today, giving his outlook on the US economy. Powell will be giving his perspective two weeks after the Fed cut interest rates for a third time this year. A dovish sounding Powell could force investors to raise bets of another rate cut from the Fed. This could drag the dollar lower.
| 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. |
