Why Did the Euro Appreciate against the US Dollar?


Jun. 25 2018, Updated 5:45 p.m. ET

Euro gains on US dollar weakness

The euro-dollar (FXE) exchange rate appreciated against the US dollar (UUP) by 0.41% for the week ending June 22, primarily because of the weakness of the US dollar. Economic data released from the euro area remained upbeat as economic data that included German and French business activity was better than expected. The other major factor that drove the euro higher was the assurances by Italian politicians that their nation would stay within the European Union.

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European equity markets, which are tracked by the Vanguard FTSE Europe ETF (VGK), didn’t have the same enthusiasm as the euro, as new tariff threats to the European car industry from the Trump administration unnerved investors. The German Dax (DAX) closed for the week ending June 22 with losses of 3.3%. In the same week, the Euro Stoxx (FEZ) was down 1.8%, and France’s CAC 40 lost 2.1%.

Euro speculative bets continued to decline

As per the latest commitment of traders report, released on June 22 by the Chicago Futures Trading Commission (or CFTC), speculators have decreased their bullish positions on the euro (EUFX) by 52,107 contracts as of June 19. The total net speculative bullish positions on the euro decreased from 88,225 contracts to 36,118 contracts.

The outlook for the euro

There is a lot of important economic data expected from the EU this week. The German and EU Ifo business climate and inflation data will be the key data to watch out for. The broader theme, however, will be dependent on the trade tariff developments, where the chances remain high for downward pressure on the shared currency.


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