Easing trade tensions and strong US data strengthened the dollar, sending the euro US dollar exchange rate to a three-week low on Tuesday. The pair trended southwards across the session hitting a nadir of US$1.1063. The euro is holding steady in early trade on Wednesday.
The euro was weak across the board in the previous session. There was no eurozone economic data for investors to digest, leaving the euro to trade at the will of the stronger dollar.
Today there is a slew of eurozone data for investors to watch. The most closely eyed will be the service sector pmi data and retail sales figures for the bloc. Analysts are expecting service sector activity to remain steady in October at 51.8, whereby the figure 50 separates expansion from contraction.
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Analysts are expecting retail sales to increase just 0.1% month on month in September, down from 0.3% the previous month. Retail sales figures are important because they are considered a future indication of inflation. Weak retail sales points to weak inflation down the road. Inflation in the eurozone grew at just 0.7% year on year, the European Central Bank won’t want to see inflation decline further. A soft reading could see the euro fall further.
US Dollar Gains Strength On Positive Data
Data published by the Institute for Supply Management (ISM) revealed that economic activity in the non-manufacturing sectors accelerated in October. The non-manufacturing index jumped to 54.7 in October, rebounding from a three-year low of 52.6, hit in September. This was ahead of analyst’s expectations of a reading of 53.5.
The data shows that the slowdown in the manufacturing sector amid the ongoing US — China trade dispute has not spread over into other areas of the US economy. This is good news for the US economy and therefore good news for the US dollar.
There is no high impacting US economic data due for release today. Therefore US — China trade headlines will drive dollar movement. Recent reports that tensions are easing between the US and China have helped boost the dollar. Investors are growing increasingly confident that the two sides will be signing a phase one deal, possibly as soon this month. The Nasdaq and the Dow Jones stock markets soared to fresh all-time highs on trade deal optimism, boosting demand for 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. |
