EUR Rises, USD Falls On China Optimism

Must Read

The USD fell across the board at the start of the month as China’s vigorous manufacturing activity strengthened other commodity currencies. The German inflation also contributed to the weakening of the USD as it allowed the EUR gains.

According to Fiona Cincotta, a market analyst for Forex, “US futures are lacking direction as investors weigh up a stronger-than-forecast economic recovery in China against concerns that the Federal Reserve will keep raising interest rates higher for longer.”

Cincotta added that the growth of Chinese manufacturing activity was at its fastest in over a decade, demonstrating that the second-largest economy is recovering quickly. She also noted that the strong recovery might be inflationary and end up in a no-landing scenario.

The market analyst added that traders are pricing at a higher terminal rate of 5.25 to 5.5 per cent as the fears of persistently high inflation and interest rates for longer impacted the risk sentiment for the previous month.

Gertrude Chavez-Dreyfuss and Herbert Lash, journalists for Reuters, also noted that along with the Chinese Yuan, the Australian and New Zealand dollars rose, thanks to the Chinese purchasing managers’ index (PMI) shooting up last February to 52.6 from January’s 50.1.

The journalists added, “China’s non-manufacturing activity also grew at a faster pace in February, and the Caixin/S&P Global manufacturing PMI reading for last month surpassed market expectations.”

Klarity FX executive director Amo Sahota shared that the market is beginning to respond to other data outside the US, as reflected by the sudden outperformance of some commodity currencies during the start of the month.

The journalists mentioned that the EUR was another outperformer, boosted by German inflation. The EUR rose 0.8 per cent to $1.066 due to the unexpected rise in German consumer prices. Another factor that led to the USD weakening was the consistent contraction of the US manufacturing activity. It has contracted for four consecutive months.

- Advertisement -spot_img
Latest News
- Advertisement -spot_img

More Articles Like This

- Advertisement -spot_img