Euro (EUR) Exchange Rate Lower Despite Confidence Improvement
The Euro continued trading lower against the US Dollar and British Pound on Wednesday despite a report showing an improvement in consumer confidence in the Eurozone.
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Even as the prospect of European Central Bank stimulus in June piled on the pressure and the situation in Ukraine sparked a bout of risk aversion, the sentiment measure climbed from -8.6 to -7.1 in May.
Economists had been expecting a more modest improvement to -8.3.
The advance took consumer confidence to its strongest level for almost seven years.
Before the figures were published trader Jawaid Afsar commented; ‘Europe may outperform the US in the weeks ahead. The ECB especially will help Europe. Italy and Spain are likely to benefit the most, as well as Germany’.
However, while the result was better than expected the Euro failed to recoup earlier losses against the Pound.
The common currency was struggling against its British counterpart after UK retail sales figures upped the odds of a Bank of England interest rate increase.
The unexpectedly upbeat 1.3 per cent jump in retail sales including auto fuels saw Sterling post widespread gains against almost all of its rivals.
Sterling strength persisted even after the BoE’s meeting minutes showed that none of the nine-member Monetary Policy Committee pushed for a rate increase.
The Euro’s relationship with the US Dollar was also under pressure before the publication of minutes from the latest Federal Open Market Committee meeting.
US Dollar gains occurred in spite of investors betting that the FOMC minutes will be dovish in tone and restate the central bank’s commitment to keeping interest rates at record lows for the foreseeable future.
Tomorrow considerable Euro movement could be inspired by the Markit manufacturing/services PMI for the Eurozone, Germany and France.
The gauges are expected to show that both the Eurozone’s services and manufacturing sectors expanded at a slightly slower pace in May.
The measures are supposed to provide readings of 53.2 and 53.0 respectively with the composite index for the currency bloc achieving 53.9, down slightly from 54.0 in April but still well above the 50 mark separating growth from contraction.
Of course final UK GDP figures for the first quarter will also influence the direction taken by the GBP/EUR pairing tomorrow, and investors with an interest in the EUR/USD exchange rate will be focusing on US manufacturing PMI, initial jobless claims and existing home sales.
The Euro is currently trading against the US Dollar in the region of 1.3666 and against the British Pound in the region of 0.8093.