The Euro US Dollar exchange rate edged higher today and is currently trading around $1.1392 on interbank market.
The Euro rose despite the publication of the German IFO business expectations figures for June, which eased below the forecast 94.5 decrease to 94.2 – a near five-year low.
This has left many single currency traders jittery as the Eurozone’s largest economy shows signs of slowing down.
Analysts at Capital Economics, commented:
‘There are two likely reasons for the deterioration in business expectations. First, businesses’ concerns about the trade war may have risen. And second, given that the survey was conducted earlier in the month, it may suggest that businesses were worried about the ECB not loosening policy sufficiently.’
Today also saw the German IFO business climate figures for June which, however, improved at 97.4, exceeding forecasts.
Brexit is also in focus for many Euro traders, with the UK currently undergoing the Tory leadership race, which is dividing debate over the UK’s future with the EU.
Boris Johnson, the former Mayor of London, is a current favourite, and being a hard-Brexiter, this has caused some concerns that the UK could leave the EU on 31 October without a deal.
The US Dollar, meanwhile, fell following the publication of the Chicago Fed National Activity Index figures for May, which rose to -0.05.
Today also saw the printing of the US Dallas Fed Manufacturing Business Index for June, which fell below its forecast increase of 4.8 to a disappointing -12.1.
Global political news has, however, remained in focus with President Donald Trump due to meet Chinese President Xi Jinping in Osaka later this week.
This has buoyed hopes that US-China trade tensions could ease, and possibly even result in a deal between the two superpowers.
Chinese Vice-Commerce Minister Wang Shouwen said:
‘Equality and mutual benefit means the consultations have to happen on an equal basis, the agreement to be reached has to be beneficial for both sides. Meeting each other half way means both sides have to compromise and make concessions, not just one side.’
‘Greenback’ traders will be looking ahead to tomorrow’s slew of US economic data, with investors paying close attention to housing price figures for April, which are expected to improve.
Tomorrow will also see Jerome Powell, the Chair of the Federal Reserve, deliver a speech, and with any further signs of dovishness about the US economy, this could weigh on the USD/GBP exchange rate.
The Euro US Dollar exchange rate, however, will remain sensitive to political developments this week, with Donald Trump’s G20 meeting with China’s President remaining in focus.
Any signs that the two superpowers could agree on a potential trade deal would buoy US market optimism in the ‘Greenback’.