The euro trended lower versus the US dollar for the fourth straight session on Thursday. The euro US dollar exchange rate dropped to a low of US$1.1037. The pair is holding steady around US$1.1050 in early trade on Friday.
The euro came under pressure in the previous session following weak German industrial production data and as the European Commission slashed growth forecasts for the bloc. Data showed that industrial production in German tumbled in September back to levels not seen for over two and a half years, adding to fears that Europe’s largest economy was in recession. Industrial production fell by -0.6% month on month in September, well below the 0.3% increase from the month previous. The weak data overshadowed stronger German Factory orders earlier in the week and added to fears that Europe’s largest economy is heading into recession.
The European Commission cut growth forecasts owing to Brexit uncertainty and ongoing global trade tension, which weighed on the euro. Growth of 1.1% is now forecast for this year, down from 1.2%. Next year growth of 1.2% is forecast, down from 1.5%. The news comes just a month after the ECB eased monetary policy to shore up the slowing economy.
Will US Consumer Confidence Bolster the Dollar?
The dollar gained across the previous session, boosted by comments from a Chinese commerce ministry official, indicating that the two global powers were inching closer to a trade deal. The Chinese official and the US have said that the two sides had agreed to cancel in phases the tariffs imposed during the trade war. Should China and US achieve a trade deal the US economy and particularly the manufacturing sector could benefit, potentially pulling the sector out of its ongoing slump. The would be beneficial for the dollar.
Today investors will continue digesting any trade headlines. This trade dispute has often moved two steps forward one step back. On the US economic calendar, University of Michigan consumer confidence could attract some attention later today. Analysts expect consumer sentiment to hold steady at 95.5. Any sign of strength in the release could boost the dollar. This is because a confident consumer tends to spend more, which is good for the economy and inflationary pressure.
|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.