The euro extended gains versus the US dollar in the previous session. The euro US dollar exchange rate closed on Monday up 0.1% at US$1.1142. The pair is consolidating recent gains in early trade on Tuesday.
The euro pushed higher in the previous session as investors focused on improved risk sentiment rather than the slightly disappointing eurozone PMI figures.
Eurozone business growth remained weak in December. Weak foreign demand resulted in a further contraction in manufacturing, which offset a slight pick up in service sector activity. The HIS Markit Eurozone Composite Flash Purchasing Managers Index (PMI), which is considered a good guide to economic health, remained steady at 50.6 in December. This was just below analysts’ expectations of 50.7. Any figure above 50 indicates expansion.
Today there is no high impacting eurozone data for investors to digest. Instead the euro is expected to move at the will of the US dollar.
Will US Manufacturing & Industrial Production Rebound?
The dollar is pushing higher in early trade on Tuesday as investors continue digesting the first phase trade deal and as they look ahead to a barrage of US data releases.
The first phase US — China trade deal was announced at the weekend. Overall the market’s reaction has been fairly subdued to the news. The dollar has taken a small hit as risk appetite improved and investors sold out of the safe haven dollar. However, given the lack of details surrounding the deal its impact has been minimal. The de-escalation of the trade dispute had already been priced in to a large extent.
Looking ahead the dollar could be well supported following the release of manufacturing and industrial production data. Analysts are expecting both manufacturing and industrial production to have rebounded in November, with 0.8% growth month on month. This would be a solid improvement from October’s -0.6% and 0.8% decline respectively.
Strong manufacturing and industrial production data would help quell concerns over the health of the manufacturing sector which has been negatively impacted by the US — China trade dispute.
| 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. |
