The euro gained 0.5% versus the US dollar across the previous week. The euro US dollar exchange rate hit a high of US$1.12 before slipping to close the week at US$1.1122. The pair is advancing in early trade on Monday, although gains look fragile following a weak German PMI reading.
The euro rallied last week following the resounding Conservative win in the UK general election. The Brexit clarity that comes with Boris Johnson’s 80 seat majority is not only good news for the UK economy, but also for eurozone economies. As a result, the euro charge higher.
Today, euro investor’s attention will return to eurozone fundamentals, with the release of PMI’s. The euro is paring early gains following downbeat German PMI data. Figures showed that activity in the German private sector shrank for a fourth straight month in December. A downturn in manufacturing offset service sector growth in Europe’s largest economy. The data fuelled concerns over he health of the German economy, weighing on demand for the euro. Investors will now look towards PMI data from the rest of the bloc.
Dollar Dips Post Trade Deal
The safe haven dollar declined following the announcement of a US — China trade at the end of last week. The US has agreed to cut tariffs to 7.5% on $150 billion of Chinese imports. Tariffs of 25% will remain on $250 billion of Chinese imports. Meanwhile, China had agreed to increase agricultural purchases from the US, although they didn’t say by how much. The deal is short on detail, however it still lifted risk sentiment dragging the safe haven dollar lower.
Attention will now turn to phase two of the talks. Trump is keen to begin phase two discussions immediately. China, however, is saying than phase two talks are dependent on phase one being implemented.
A more dovish than expected Federal Reserve last week also hit demand for the green back. Investors had been disappointed by the Fed saying that a significant and persistent lift in inflation was needed to consider raising interest rates.
Investors will listen carefully to Fed speakers as they hit the wires this week in an attempt to gauge the outlook for interest rates.
| 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. |
