The euro US dollar exchange rate is holding steady, comfortably above US$1.1150 on US — China trade deal hopes and stronger than forecast eurozone data. The pair is trading in a tight range and hit a high of US$1.1176.
The manufacturing sector in the eurozone and particularly in Germany has been experiencing a slump in recent months. The ongoing US — China trade dispute, slowing global orders bd even Brexit has all taken their toll on the sector. However, today’s manufacturing pmi’s showed that the contraction could have hit a bottom. Data showed that activity in the manufacturing sector in the eurozone ticked higher to 45.9, above the 45.7 analysts had forecast. Germany’s manufacturing pmi also increased to 42.1, from 41.9. Whilst the sector is clearly in contraction (any level below 50), it is at least now moving in the right direction. The better than forecast figures offered some relief to euro investors who fear that a recession could be around the corner.
Today new European Central Bank President Christine Lagarde delivers her maiden speech in Berlin. As the managing director of the International Monetary Fund, Christine Lagarde was vocal in her call on governments to do more to support economies through fiscal spending. This is the same message that Mario Draghi pushed time and time again, although he encountered strong opposition, particularly from Germany. Investors will listen to the speech carefully to gauge to what extent Christine Lagarde intends to lean on fiscal spending to support the ECB’s policies. A strong bias towards fiscal spending could see the euro rise. However, if she pledges to do more, the euro could drop on the prospect of more easing.
US Factory Orders To Drag On Dollar?
Last week left the US dollar battered and out of favour. The Federal Reserve cut interest rates, as market participants had expected. However, the central bank also indicated that it was a long way off from even considering hiking rates. In short, another cut is more likely than a hike.
The US non-farm payroll was also a mixed bag, with blockbuster headline job creation but lukewarm average hourly earnings. The US ISM manufacturing figures were also worse than what analysts had been expecting.
Today investors will look towards US factory order figures. These are unlikely to offer much support to the dollar as analysts are forecasting a month on month decline of -0.5%.
|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.