Whilst the euro continues to hover around October highs versus the US dollar, the euro US dollar exchange rate closed at the lows of the day on Monday. The pair trended southwards, closing down 0.3% at US$1.1128. The euro is edging higher versus the dollar in early trade on Tuesday.
The euro remained resilient in early trade on Monday despite manufacturing pmi for the bloc showing that the sector remained deep in contraction in October. The manufacturing pmi ticked marginally higher to 45.9, up from 45.7 in October. However, the increase was insufficient to calm fear that the eurozone is sliding towards a recession. The eurozone manufacturing sector clearly remains stifled by the ongoing US — Sino trade dispute and the UK’s strung out exit from the European Union.
Investors also turned towards new European Central Bank President Christine Lagarde for her first official speech in her new role. Investors were hoping to learn more about her intentions for monetary policy and her take on further easing. However, she avoided the subject altogether.
Today there is some mid-tier eurozone data to be released, the producer price index (ppi) data. This measures inflation at wholesale level. Weak producer prices often translate to lower inflation levels later down the line. Investors will be watching to see if ppi will disappoint.
Will US Non-Manufacturing Data Boosts Dollar?
Weak US factory orders weighed on demand for the US dollar early on in the US session on Monday. The data showed that US factory orders declined -0.6%, the worst drop in 4 months in September. The data confirmed investor fears that the US was still experiencing a slump in the manufacturing sector amid the ongoing US — China trade dispute.
Whilst the factory order data was gloomy, it comes as tensions are allegedly thawing between the US and China. US Commerce Secretary Wilbur Ross said over the weekend that he was optimistic that he two sides would quickly overcome the remaining issues to sign a first phase trade deal soon.
Trade deal optimism sent the US stock market soaring to an all-time record high, boosting the demand for the greenback at the same time.
The dollar could extend gains from the previous session as investors look towards US ISM non-manufacturing figures. Analysts are expecting service sector activity to have expanded at a faster pace in October. This could calm any concerns of the US manufacturing slowdown spilling across into the service sector and boost 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.