Pound Drops vs. Euro on Brexit Fears & Weak Manufacturing Data

The euro trended higher versus the US dollar across the previous week. The euro US dollar exchange rate rallied for 5 consecutive sessions, finishing Friday at €1.1167. This was the highest close for the pair in two weeks. The euro has started the new week flat versus the US dollar.

Despite a mixed bag of data in the previous week, the euro advanced. Eurozone GDP data showed that he eurozone expanded at a faster rate than what analysts were expecting. The eurozone economy grew at a rate of 0.2% quarter on quarter in the third quarter. This was inline with growth in the second quarter and ahead of analysts’ forecasts of just 0.1% growth. The GDP data helped ease investor fears over the bloc sinking into recession.

Inflation in the bloc increased at just 0.7% year on year in October, down from 0.9%. Inflation falling away from the European Central Bank’s target will be a cause for concern for the new ECB President Christine Lagarde, who started the role on Friday. Today she is due to give a speech, investors will listen carefully as to see whether Christine Lagarde intends to follow Mario Draghi’s supportive stance.

Euro investors will also be looking towards eurozone manufacturing pmi data and investor confidence data for the bloc, which analysts predict will improve in November.

US Factory Orders & China — US Trade

The mood towards the dollar soured across the previous week, amid a lack of clarity over progress in the US — China trade dispute, a rate cut from the Federal Reserve and amid a mixed US jobs report.

Friday’s non-farm payrolls showed that 128,000 jobs were created n October, ahead of the 85,000 expected. However, average hourly wage increased just 0.2%, below the expected 0.3%. The weak wage growth forced investors to assume that any rate hike by the central bank will still be a long way off.

This week investors will continue watching US — China trade dispute headlines closely for clarification as to if and wen the phase 1 deal could be signed. US data will also remain in focus with US factory orders and IISM non-manufacturing figures due Monday and Tuesday respectively. Weak data could prompt investor expectations of another rate cut from the Fed and drag on 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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