Euro/US Dollar Exchange Rate Falls

The Euro US Dollar (EUR/USD) exchange rate fell this morning as German factory orders missed expectations. Meanwhile, the US Dollar (USD) is recouping yesterday’s losses in the aftermath of the Federal Reserve’s mixed press conference.

At the time of writing, EUR/USD is trading at $1.1545, down 0.6% from today’s opening levels.

The Euro (EUR) is trading down today as this morning’s disappointing German factory orders weigh upon the single currency. Subsequently, the finalised Eurozone services PMI printed lower-than-expected, exacerbating downside.

The weaker rebound in German factory orders suggests that recovery in the manufacturing sector of Europe’s economic powerhouse seems to be losing momentum. Contracts for goods ‘Made in Germany’ jumped 1.3% in September, rather than 2% as expected.

However, while new orders declined 2% for intermediate goods and 1.7% for consumer goods, orders for machinery and equipment jumped 12.2%.

These were supported by orders from countries outside the Euro Area, which were up 14.9%; compared with February 2020, the month before restrictions were imposed due to the coronavirus pandemic in Germany, new orders were 8.6% higher overall.

Following the German data, the finalised Markit services PMI for the Eurozone narrowly missed forecasts of 54.7, printing below September’s final of 56.4.

The latest reading pointed to the slowest growth in the services sector since April, as inflationary pressures continued to build and service providers registered the strongest increases in costs and selling prices for just over 21 years.

The US Dollar is climbing as a risk-off mood prevails ahead of today’s Bank of England (BoE) rate decision.

Investors are still digesting yesterday’s Federal Reserve announcement: the Fed decided to reduce its asset purchases from mid-November, although Chairman Jerome Powell stressed that a rate hike won’t necessarily follow immediately as quantitative easing concludes.

Initially, the US Dollar dropped as traders were disappointed in their hopes of an early rate hike. However, the ‘Greenback’ recovered its strength today ahead of America’s scheduled trade balance release.

The Fed’s forward guidance was anticipated by many, as the central bank had signalled its intentions in September, when half of policymakers also forecast the first post-pandemic rate rise next year.

According to Rebecca Chesworth, senior strategist at State Street’s SPDR exchange traded fund unit, investors are now using the bond markets to play out their central bank forecasts.