Encouraging eurozone data and disappointing US statistics meant the euro pushed higher versus the US dollar in the previous session. The euro US dollar exchange rate rallied to a three-day high of US$1.1039, before closing the session just shy of this level. EUR/USD is holding those gains in early trade on Friday, despite the World Health Organization declaring the outbreak of coronavirus a world emergency.
Euro
The euro was in favour in the previous session as the growth outlook for the region slowly starts to improve. The unemployment rate in the bloc unexpectedly ticked down to 7.4% its lowest level in a decade and just 0.1% above the lowest level ever recorded. Continued job growth is important for continued expansion in the service sector. The momentum is set to continue for the months ahead as business are upbeat about their hiring expectations going forward.
Eurozone sentiment is also on the rise. The economic sentiment index was surprisingly upbeat with, particularly French and German industries, which bodes well for the recovery of this sector which was hit hard by US – China trade dispute.
Today economic data will remain in focus with a slew of data expected. Eurozone inflation could be the most closely watched macro data release. Analysts are expecting inflation to tick higher to 1.4% in January.
Dollar
The US dollar was under pressure in the previous session as investors turned their attention away from the spread of coronavirus towards US data. Whilst the fourth quarter GDP printed in line with expectations at 2.1% the devil was in the detail. The personal consumption component of the report was 1.8%, down from 3.2% in the third quarter and the 2% that analysts forecast. This is a figure that the Fed follows closely. Given the dominance of the US consumer in the US economy, this doesn’t bode well for future growth or the PCE inflation figure today.
The dollar is finding broad based support ahead of the PCE reading thanks to continued flows into safe haven assets after the World Health Organisation has declared a global health emergency following the rapid spread of coronavirus.
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. |