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Euro Attempts to Hold Ground amid Clashing Fundamentals

August 22, 2019 at 20:32 by Vladimir Vyun

A fan of 500-euro billsThe euro was relatively firm today, though the currency fell against some of its rivals, most notably the extremely strong Great Britain pound. Fundamentals clashed, with positive macro releases pushing the currency up but the dovish stance of the European central bank driving it down.

PMI figures released on Thursday for France, Germany, and the whole eurozone showed an improvement in August compared with the previous month. On top of that, all figures beat expectations. It is important to note, though, that the manufacturing sector in Germany and the whole eurozone continued to contract, just with a slower pace. Manufacturing in France turned from contraction into expansion.

Eurostat reported that the consumer confidence indicator remained at -7 in August, basically unchanged from July and matching economists’ expectations.

The European Central Bank released today minutes of its July monetary policy meeting. The note demonstrated a clearly dovish bias, stating:

Members broadly supported the reintroduction of an easing bias to the Governing Council’s forward guidance on interest rates in the light of the weakness of the economic outlook and the muted inflation developments.

The minutes added further:

The Governing Council also underlined the need for a highly accommodative stance of monetary policy for a prolonged period of time, as inflation rates, both realised and projected, had been persistently below levels that were in line with its aim. Accordingly, if the medium-term inflation outlook continued to fall short of its aim, the Governing Council was determined to act, in line with its commitment to symmetry in the inflation aim. It therefore stood ready to adjust all of its instruments, as appropriate, to ensure that inflation moved towards its aim in a sustained manner.

EUR/USD traded at about 1.1081 as of 20:31 GMT today, near the opening of 1.1084, after rallying to the high of 1.1113 intraday. EUR/GBP slumped from 0.9143 to 0.9043, touching the lowest level since July 29. EUR/CHF edged up from 1.0889 to 1.0902.

If you have any questions, comments, or opinions regarding the Euro, feel free to post them using the commentary form below.

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