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Euro to US Dollar Exchange Rate Fluctuates in Anticipation of Jackson Hole Fed News

Published: 22 Aug at 5 PM Tags: Euro, Dollar, America, Eurozone, USA, China, Germany,

Despite some stronger than expected Eurozone data and weaker US data today, the Euro to US Dollar (EUR/USD) exchange rate has failed to advance or hold its ground. Investors are largely hesitant to make any big moves on the US Dollar ahead of tomorrow’s session, when many analysts expect big developments from the Federal Reserve at the Jackson Hole Symposium.

After last week’s EUR/USD tumble from 1.1200 to 1.1093, the pair has slowly edged lower still this week but has largely been trending in a fairly narrow region. EUR/USD has been fluctuating between lows of 1.1067 and highs of 1.1108.

1.1067 was the lowest level for EUR/USD since the beginning of the month, which is when EUR/USD touched on its worst levels since 2017. At the time of writing, EUR/USD saw mixed movement below the week’s opening levels.

Demand for the Euro remained weak today, even though the latest Eurozone data largely beat market expectations. Markit’s August PMI projections beat forecasts in most notable prints, including the key German manufacturing print.

However, German manufacturing was still highly concerning overall. The data indicated that while better than expected, Germany’s manufacturing sector was still projected to contract at 43.6 this month. This kept investors anxious about the possibility of a German recession in the coming quarters.

On top of German recession fears, the latest Eurozone consumer confidence projection printed at a worse than forecast -7.1 and the latest European Central Bank (ECB) meeting minutes affirmed the bank’s signals that it was preparing a substantial stimulus package.

Overall, these concerns weighed heavily on the Euro and made it easier for the US Dollar to firm despite some poor US data.

Investors have been hesitant to sell the US Dollar ahead of what could be some major Federal Reserve news at the end of the week, and this has helped the US currency to see solid support this week.

The Global Central Bank Symposium at Jackson Hole began today, and tomorrow will see Federal Reserve Chairman Jerome Powell hold a speech. Markets are highly anticipating this speech, which could see Powell offer more signals in relation to recently worsening US-China trade tensions and rising recession speculation around the globe.

Due to anticipation for Powell’s symposium speech, the US Dollar failed to benefit much from the Federal Reserve’s slightly more hawkish than expected meeting minutes on Wednesday. However, it also prevented the US Dollar from falling in reaction to the latest weak US PMI results.

Markit’s US PMI projections, while not as influential as ISM’s PMI readings, worsened concerns about the health of the US economy by coming in short of expectations in all readings. The manufacturing projection even fell below 50, printing a slight contraction of 49.9.

While tomorrow’s US new home sales report is unlikely to be particularly influential, Euro to US Dollar investors will be far more interested in the Jackson Hole Symposium and its potential influence on central bank bets and the global economic outlook.

Central bank officials from around the world will be attending the event, and if concerns of a US-China trade war, currency war, or global recession are played up they could have a notable impact on forex markets.

Tomorrow’s biggest event will be a Jackson Hole speech from Federal Reserve Chairman Jerome Powell.

If Powell’s tone is seen as becoming more dovish due to trade war or recession fears, Federal Reserve interest rate cut bets could rise and the US Dollar would weaken.

Depending on what developments occur at Jackson Hole over the next few days, European Central Bank (ECB) speculation could also be influenced and this would also impact Euro to US Dollar exchange rate movement.
As of Thursday, 22nd August 2019, the Pound Sterling currency rates mentioned within this news item were as follows:

GBP EUR exchange rate was 1.1054, GBP USD exchange rate was 1.2252, and GBP CNY exchange rate was 8.6789.
Dominic Lee About Author: (474 Posts)With over ten years experience as an economist – including four years spent as a chief economist with a major currency broker – Dominic has acquired a wealth of knowledge which he uses to forecast market movements. Dominic now works as an independent business advisor and writes for several financial publications.

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