Euro And British Pound Lose Some Ground On US Dollar Strength
The euro lost some ground on the strengthening of the US dollar, following the release of strong US retail sales number for June. Deteriorating investor’s sentiments about the German economy also continued to weigh in, on the Euro strength.
US Dollar Strength
The US dollar index was up 0.45% to 97.38, further piling pressure on all the major currencies. The spike came on data from the US Commerce Department showing that retail sale rose by 0.4% in June beating a 0.1% increase forecast.
The euro tumbled 0.38% to 1.1215 against the dollar as it also lost ground against the yen by 0.09% to 121.35.
The euro has remained under pressure for the better part of the year amidst growing concerns about the health of the European economy. In addition, a trade conflict between the U.S. and China and political tension involving Iran has all but continued to weigh in on the currency.
"Germany was the biggest winner among major economies from China's emergence as an economic superpower and is the most vulnerable to its slowdown. And as Germany slows, so it takes the Eurozone with it," said Kit Juckes, strategist at Societe Generale.
The sterling pound, just like the Euro, also remains under pressure on the strengthening of the US dollar. The pound hit a 27-month low on skidding below the 1.25 level against the dollar. Brexit uncertainty has continued to weigh in on the pound ahead of the appointment of the next prime minister.
Investors have continued to shun the British pound on concerns that the country will fail to reach an exit deal with the European Union. The Swiss franc, on the other hand, has continued to edge higher, having emerged as a safe haven for countering concerns in the Eurozone economy.
Central Banks Policy Meeting Expectations
The Euro and Pound could continue to edge lower should the US Federal Reserve resolve not to cut interest rates. The Fed chair, Jerome Powell, had initially hinted the possibility of the central bank cutting interest rates to support the current expansion.
However, with the U.S. economy showing signs of growth given the number of jobs created as well as retail sales growth, continues to diminish the likelihood of the FED cutting lending rates. However, traders still expect the FED to cut lending rates by at least a quarter-point at the end of the month.
Concerns about the health of the European economy also continue to fuel suggestions that the European Central Bank will cut policy rates. Data by ZEW institute shows that economic sentiment among German investors is on the decline an indication of a slowing economy.
The Foreign exchange market could remain quiet ahead of policy meetings by central banks at the end of the month. According to the Deutsche Bank Currency Volatility Index, volatility in the currency market is down. The outcome of the European Central Bank and the FED could set the stage for robust movements in the forex market.