The euro soared versus the US dollar in the previous session. The euro rallied from a low of US$1.1003 to a high of US$1.1090 amid concerns over the health of the US economy and on the prospect of trade wars on many more fronts that just China. The pair is holding those gain in early trade on Tuesday.
Better than expected manufacturing data helped underpin the common currency. Data sowed that manufacturing activity into the bloc contracted by less than what analysts had been expecting. The manufacturing PMI printed at 46.9 in November. This was up from 48.9 in the previous month and above estimates of 46.6. However, it was below 50, the level that separates expansion from contraction, for the 10th straight month. Analysing the numbers further, market participants found that there were some encouraging signs. Forward looking indicators point to the blocs battered factories final turn in a corner.
Today sees the release if some mid-tier data; producer price index. This measures inflation at factory level. Analyst are forecasting that PPI fell -1.9% year on year in October, down from -1.2%. A weak reading points to weak consumer price inflation down the road, which is more in line with dovish central bank action.
Tariff Man Trump In Action Again
The dollar declined sharply on Monday as traders returned from the Thanksgiving extended weekend break, weighed down by weak US manufacturing figures and more international trade problems for the US.
Sentiment soured further towards the dollar after China said it won’t allow the visit of US military to Hong Kong and announced sanctions against several US nongovernmental organisations for encouraging protesters. These moves come following Trump signing the Hong Kong bill into law. This highlights the tensions that remain between the US and China and raised concerns over the chances of a phase one trade deal being reached soon.
Trump also announced trade tariffs to base metal imports from Argentina and Brazil. Furthermore, the Trump administration threatened the EU with tariffs over the Airbus – Boeing case. The prospect of trade wars on multiple fronts unnerved dollar investors, weighing on the greenback.
Data showing that the US manufacturing sector slipped deeper into contraction in November added to the dollar’s woes sending it further southwards. November is the fourth straight month that manufacturing contracted. The data raised concerns over the health of the US economy.
Looking ahead macro-economic data will be in short supply today. Instead investors will remain fixated on trade developments.
|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.