The euro fell through US$1.11 in the previous session as ECB’s Draghi bid farewell and as investors digested mixed US figures. The euro US dollar exchange rate dropped to a low of US$1.1093. The pair is holding steady in early trade on Friday.
The euro was out of favour in the previous session as European Central Bank President Mario Draghi took to the stand for the last time. After his 8-year term of serving as President of the ECB, he left investors with a gloomy picture, warning that low interest rates were here to stay.
Data earlier in yesterday’s session was supportive of Draghi’s downbeat outlook. PMI data confirmed that activity is subdued in Germany and across the eurozone as a whole. Stagnating, low inflation remains a persistent problem in the bloc, one that Draghi has been unable to resolve. Draghi said that he expected inflation to drop lower. He also affirmed that “ample degree of monetary accommodation is still needed.” The prospect of lower interest rates for longer sent the euro lower.
The euro could come under further pressure today as investors turn their attention towards German consumer confidence data and IFO German business climate numbers. Analysts are expecting both readings to decline which, could fuel fears that Germany is in recession.
Dollar Advances As Manufacturing Steadies
The dollar advanced in the previous session as investors focused on the upbeat US data releases, rather than the numbers that missed analysts’ forecasts. Whist durable goods orders left investors fretting over the health of the economy, stronger manufacturing pmi figures helped quell those worries.
The gauge of US manufacturing activity unexpectedly improved in October for a second straight month. This offered investors some hope that the sector could be stabilising. The manufacturing pmi rose to 51.5 in October, up from 51.1 the previous month. A reading of 50 separates expansion from contraction. Whilst this move higher has calmed immediate concerns, manufacturing is likely to continue to weigh on the economy amid ongoing US — Sino trade concerns and slowing global growth.
Today investors will look towards US consumer confidence. Analysts are expecting sentiment to remain steady in October.
| 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. |
