The euro traded with a negative bias versus the US dollar on Wednesday. The euro US dollar edged lower, closing the session down 0.1% at US$1.1004. EUR/USD is holding steady in early trade on Thursday as investors continue to asses the Fed’s monetary policy announcement and as they look ahead to a barrage of eurozone data.
Euro
The euro trended lower in the previous session despite an unexpected uplift in household morale in Europe’s largest economy. German GFK consumer confidence jumped to 9.9 in February, up from 9.6. Higher morale is often tied to increased readiness to spend. Therefore, the data suggests that consumer spending could be set to rise in Germany the near future. This is god news for the economy. The improvement in confidence stems partially from the US – China first phase trade deal; a deal which is expected to boost global trade, a plus for exporter nation Germany.
Today investors will be looking towards German unemployment figures and German inflation data for further clues over the health of the German economy. Analysts are expecting inflation to tick higher to 1.7% year on year. Whilst this is still below the central bank’s 2% target level it is a step in the right direction, up from 1.5%. A strong reading could boost the common currency.
Dollar
The dollar retained its strength in the previous session, even as risk sentiment crept higher. US stock market closed higher despite continued concerns surrounding the spread of the coronavirus.
The dollar barely reacted to the Federal Reserve monetary policy announcement. The Fed, as broadly expected kept rates on hold at 1.5% – 1.75%. The statement was almost identical to the previous month’s, with a slight change in the description of household spending from strong to modest.
The continuity of policy and in the statement suggests that the Fed still views the economy as “in a good place”. The Fed also said it is closely monitoring the spread of coronavirus and its potential impact on the global economy.
Today investors will look towards the release of US GDP data. The expectation is for GDP to grow 2.1% year on year in Q4, in line with the previous estimate.
| 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. |
