The euro dropped versus the stronger dollar on Thursday, the first trading day of the New Year. The pair closed 0.37% lower at US$1.1171, just above the low of the day. The pair is holding steady in Asian trade overnight.
The euro lost ground in the previous session as investors digested disappointing manufacturing data for the region. The closely watched HIS Markit PMI index showed that manufacturing activity contracted for an eleventh straight month in December. The index dropped to 45.9, down from 46.9 in the previous month. The overall levels were brought down by a deterioration in Germany.
Germany is by far the largest manufacturer in the European Union. German manufacturing PMI declined to 43.4 in December down from 44.1 in November. This was the first downward movement by in the index in three months. The reading was also significantly below the 44.5 that analysts forecast. The data was particularly disappointing as investors had been hoping that the slowdown in the German economy and the eurozone as a whole was bottoming out.
The German economic calendar will remain under the spotlight today. Investors will look towards German unemployment data and German inflation data for further clues as to the health of Europe’s largest economy. Analysts are expecting consumer prices in Germany to increase by 1.4% on an annual basis, up from 1.2%. Stronger inflation could help boost the euro.
US ISM Manufacturing & Fed Minutes Up Next
The US dollar charged higher on Thursday after being out of favour in recent weeks. Strong indications that the US and China are on the brink of signing and formally entering into a first phase trade deal has hit demand for the safe haven buck.
However, concerns are starting to emerge over the likelihood of a phase two trade deal. Analysts consider that a second stage deal will be much harder to secure.
Today dollar investors will switch their attention back to US macro-economic data releases. US ISM manufacturing data along with the minutes from the December Federal Reserve monetary policy meeting will be under the spotlight. Market participants will be scrutinising the minutes closely for clues as to where the Fed intends to take monetary policy after pressing pause indefinitely on the current cutting cycle.
| 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. |
