The euro rallied versus the US dollar thanks to improved risk sentiment on Wednesday. The euro US dollar exchange rate hit a high of US$1.1164 before easing slightly into the close. The pair ended Wednesday’s session 0.2% higher at US$1.1150. The euro is pushing higher in early trade on Thursday.
The euro advanced in the previous session as investors cheered the signing of the US – China trade deal. After months of wrangling, the world’s two largest economies, responsible for 40% of global trade, signed the phase one trade deal. Investors have become increasing hopeful that the trade deal will improve global sentiment and could boost foreign trade reliant Germany’s economy.
Data showed that the German economy grew at just 0.6% year on year, the slowest rate in 6 years and down from 1.5%. Germany’s, manufacturing sector is the biggest drag on the economy and is in deep recession amid slow global demand and Brexit. The trade deal could help restore confidence and lift foreign trade demand.
Any gains in the euro were also capped by weaker than forecast industrial production data for the region. Industrial output declined -0.2% month on month, raising concerns over the health of the eurozone manufacturing sector.
Today investors will look ahead to German inflation data and the minutes from the December European Central Bank meeting. This was Christine Lagarde’s first meeting at the helm.
Christine Lagarde is also expected to deliver a speech tomorrow. Any sense of dovishness could drag on the common currency.
US Retail Sales To Boost Dollar?
The US dollar dipped lower on the day that the US and China signed the historic phase one trade deal. The US announced that it will not be reducing trade tariff on Chinese imports just yet. It will wait until after the US presidential election to ensure China’s compliance with its commitment. This disappointment was overshadowed by US Treasury Secretary Steve Mnuchin saying that phase two negotiations could start as soon as phase one were signed. As sentiment improved the safe haven dollar declined.
Today the dollar could receive a boost with the release of US retail sales data. Analysts expect retail sales to increase 0.3% month on month in December, up from 0.2% the previous month. Strong retail sales are important in the service sector dominant USA economy, additionally they create inflationary pressure. Good news for 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. |
