The euro dropped steadily lower versus the US dollar in trade on Tuesday, despite encouraging ZEW sentiment data. The pair is trading down 0.1% but is managing to remain above the key psychological level of US$1.10. This is more abut dollar strength than euro weakness.
The euro was trading broadly flat versus its major peers, albeit lower versus the dollar, even after German ZEW data showed that sentiment rebounded in November. Investor sentiment in Europe’s largest economy improved by more than what analysts had been expecting amid growing optimism surround US — China trade talks. The headline index jumped from -22.8 in October to -2.8 in November, better than the -13 analysts had forecast. Usually this strength in data would boost demand for the euro, however investors are opting to sit on the side lines.
Looking ahead, the euro could lack direction for another session as German inflation figures are expected to remain steady in October at 1.1%. Meanwhile analysts expect eurozone industrial production to decline on a month on month basis but pick up annually.Reports that President Trump is set to postpone slapping tariffs on European cars for another six months has also had little impact on the euro. The delay, which would have hit the German automobile industry hard, is due to be signed off this week. Should Trump fail to sign the delay, the euro could fall sharply.
Dollar Rises On Safe Haven Status
The dollar was on the rise on Tuesday amid a lull in trade war headlines and bubbling tensions in Hong Kong.
With a quiet US economic calendar, investors will turn their full attention to a speech by President Trump around noon local time at the New York Economic Club. Investors will be keen to hear his take on US — China trade talks after he recently denied agreeing to gradually rolling back trade tariffs as part of each phase of the trade deal.
It can be difficult to predict how the dollar will react to positive trade deal news. On the one hand the dollar is a safe haven so it could fall when faced with optimism over a deal. On the other hand, a trade deal with China would lower the chances of another Fed rate cut, which could 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.