eur-bank-notes-magnifying-glass - EUR
  • Euro (EUR) is supported by more signs of economic recovery as German car makers report an upbeat outlook
  • Eurozone manufacturing beat expectations with the sector expanding
  • US Dollar (USD) investors weigh up strong US manufacturing PMI data against Congress’ failure to agree a new rescue package
  • Democrats and Republicans will continue talks today as the clock ticks towards recess

The Euro US Dollar (EUR/USD) exchange rate is advancing on Tuesday, recouping losses from the previous session. The pair settled on Monday -0.15% at US$1.1763. At 07:15 UTC, EUR/USD trades +0.15% at US$1.1781.

Signs of economic recovery in the Eurozone are underpinning the Euro.  According to the IFO institute, Germany’s car industry is showing initial signs of picking up. Car makers expect their exports to increase, providing an upbeat outlook. The latest report from the IFO economic institute showed that expectations, demand and order books all improved in July. This adds to mounting evidence that the economic recovery in the Eurozone’s largest economy is picking up. Although the IFO caused that the indicators for current business situation remained negative in July.

The upbeat survey comes following stronger than forecast Eurozone manufacturing PMI data. The closely watched business indicators showed that the Eurozone manufacturing sector was in expansionary territory at 51.8 on the index. This was ahead of the 51.1 forecast. The level 50 separates expansion from contraction.

Looking ahead, the focus remains on the Eurozone economic calendar with the release of Eurozone producer price index (PPI). This measures inflation at wholesale level and is considered a strong lead indicator for consumer inflation. Analysts are expecting a 0.5% month on moth increase in June, up from -0.6% decline in May.

After a brief stint in positive territory on Monday, the US Dollar is once again trending lower versus its major peers. Investors are weighing up strong US manufacturing data against a lack of progress towards a rescue package on Capitol Hill.

The US ISM manufacturing PMI showed that manufacturing activity accelerated to its highest level in a year and a half in July. Orders improved despite rising coronavirus cases. The PMI figures calmed concerns that US economic recovery is being undermined by rising covid cases.

Meanwhile, Democrats and Republicans reported some progress towards agreeing a new rescue package for the US. However, some distance remains over sticking points such as unemployment benefits. The clock is ticking as recess starts on Friday.