After declining 0.4% versus the US dollar across the previous week, the euro was on the rise as trading started in Asia overnight. The pair closed on Friday at US$1.1079 but was edging marginally higher in early trade on Monday.
Tentative signs that the euro zone economy and particularly the German economy were starting to stabilise helped underpin the euro in the previous week. PMI data was broadly disappointing across the bloc. However, IFO business sentiment data for the final month of the year beat analysts’ expectations, rising to 96.3 from 95.1, whilst the forward looking IFO business expectations rose to 93.8. Stronger business morale is considered a key leading indicator and a sign that the manufacturing crisis in Europe’s largest economy could be bottoming out.
US — China trade developments were also in focus last week. A shortage of details on the agreement and the lack of a signing data unnerved investors. This week the euro will continue to be driven by trade headlines. China has said that it will cut import tariffs on more US products in the latest sign of trade tensions between the two sides dispelling. Signs that the US and China are moving forward with the trade deal and are close to signing the agreed deal would boost hopes of a recovery in the trade reliant German economy. This would in turn support the euro.
US Data Ahead Of Christmas Break
Demand for the US dollar fluctuated across the previous week as investors assessed developments in the US — China trade dispute, President Trump’s impeachment and US economic data.
On Friday the dollar rallied following a barrage of strong data. US GDP data showed that the US economy grew 2.1% year on year in the third quarter. Personal consumption was considerably better than analysts had forecast. Consumer sentiment data also higher lighted the impressive morale in households, supporting the US economy. The data increased investor expectations that the Federal Reserve will not continue to hike interest rates across the coming year.
Trade will remain in focus. There are also a couple of high impacting US data releases ahead of the Christmas break, such as housing starts today and US durable goods data on Tuesday.
| 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. |
