EUR/USD Exchange Rate Rangebound as US Manufacturing Continues to Grow
The Euro US Dollar exchange rate held steady today after falling retail sales in April has dented confidence in America’s economic recovery. The pairing is currently fluctuating around $1.21.
The US Dollar (USD) is still reeling from last week’s session after US retail sales were unchanged in April after surging in March.
Sal Guatieri, senior economist at BMO Capital Markets, noted:
‘American shoppers took a breather in April after splurging earlier this year after two rounds of big stimulus payments. But with more than half of the states now fully open for business and more quickly advancing their schedules, shoppers won’t be staying home for long.’
In US economic news, today saw the latest Empire State manufacturing index fell by 2.0 against the previous month’s 26.3. But since anything above 0.0 indicates improving conditions, today’s figure has buoyed confidence in the US economy in the months ahead.
Meanwhile, in the absence of any other notable US economic data, demand for the safe-haven ‘Greenback’ has begun to pick up owing to fears over the Indian variant of Covid-19.
As global markets become increasingly cautious about the relatively little known transmissibility of the Indian variant, demand for the safe-haven USD has begun to pick-up.
Euro (EUR) Exchange Rates Steady as ECB Upgrades Outlook for Eurozone Economy
The Euro (EUR) failed to head higher against the US Dollar (USD) today despite the European Central Bank (ECB) predicting a return to growth for the Eurozone’s economy.
The ECB’s policymakers were more upbeat in the latest policy meeting minutes, with many upgrading their forecasts and expectations for the Eurozone’s economy in the second-quarter of this year.
The Financial Times explains:
‘At the ECB’s last monetary policy meeting in April, some members of its governing council said risks to economic activity and medium-term inflation expectations had become more “tilted to the upside”, according to minutes of the discussion published on Friday.
‘While most council members agreed there were still downside risks to the eurozone’s short-term growth outlook, they pointed to “encouraging” signs from the recent rebound in global demand, the boost from the US fiscal stimulus, and the faster pace of Covid-19 vaccinations in Europe.’
As a result, single currency investors have become more optimistic about the outlook for the Eurozone’s economy, with Europe’s Covid-19 vaccination programme racing ahead while several nations are beginning to further ease lockdown restrictions.
Euro Dollar Forecast
Euro (EUR) investors will be looking ahead to tomorrow’s release of the latest Eurozone GDP data for the first quarter.
Any signs of a struggling Eurozone economy would drag down the EUR/USD exchange rate.
US Dollar (USD) traders will await tomorrow’s release of the latest US building permits and housing starts data for April.
If the outlook for the US economy continues to improve, however, then we could see the USD/EUR exchange rate edge higher.