Home EUR EUR/USD: Euro Sub $1.11 On Trade Deal Optimism

EUR/USD: Euro Sub $1.11 On Trade Deal Optimism

5th November 2019

The euro US dollar exchange rate is extending losses from the previous session. The pair dropped 0.3% on Monday and it is trading a further 0.2% lower at the time of writing, below US$1.11.

Movements in the euro were muted on Tuesday amid a shortage of eurozone economic data. Investors are opting to sit on the side-lines as they await more data to decide whether the Eurozone economy is finally showing signs of recovery, or whether it is just a pause in the continued downward trend.

Yesterday eurozone manufacturing pmi figures beat analysts’ expectations. However, they were still comfortably below 50, the level that separates expansion from contraction. So, although activity in the manufacturing sector appears to be heading in the right direction, it still shows the sector to be in a concerning state. Germany’s manufacturing sector is still a notable laggard, with investors increasingly concerned that Europe’s largest economy is tipping into recession.

Euro investors will now look ahead to eurozone service sector and retail data. Signs that the dominant service sector is at least holding steady, if not improving could offer some support to the euro.

Dollar Investors Look to Non-Manufacturing Data

The mood towards the dollar has picked up on optimism that the US and China could be closing in on a phase one trade deal. A report from the Financial Times says that US officials are debating whether to remove some tariffs on Chinese goods as a concession to seal a partial deal, possibly as early as this month.

Data has shown how the US — Sino trade dispute has negatively impacted the US manufacturing sector. Should the two sides reach a deal, the slump in the manufacturing sector could ease, benefiting the US economy and therefore the dollar. As a result, the dollar is rising on trade deal hopes.

Looking ahead investors will turn their attention away from trade headlines and towards the US non-manufacturing numbers. Analysts expect activity in the service sector to pick up to a healthy 53.4 in October, up from 52.6 in September. A strong reading could lift the dollar higher as this would ease fears over the US heading for a sharp economic slowdown.

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.