Pure FX Blog

2 February 2018

EUR Nears New 38-Month High Versus USD, as Eurozone Factories Boom

The euro to US dollar interbank exchange rate has hit 1.2517 today, close to its highest since November 18th 2014, as Eurozone factories boomed last month. Image credit: Nick Benjaminsz.

The euro to US dollar interbank exchange rate has hit 1.2517 today, close to its highest since November 18th 2014, as Eurozone factories boomed last month. Image credit: Nick Benjaminsz.

by Peter Lavelle

Welcome to Pure FX’s latest update of the euro to US dollar interbank exchange rate.

This tells you when it’s a favourable time to exchange euros to US dollars, for your money transfer!

The common currency jumps versus the greenback! The euro to US dollar interbank exchange rate has hit 1.2517 today, just a whisker below its highest in 38 months, or since November 18th 2014.

The euro has strengthened against the US dollar, because Eurozone factories expanded at a near-record pace in January, according to a closely-watched business survey yesterday.

The euro has triumphed, because Eurozone manufacturing output hit 59.6, said IHS Markit’s monthly Purchasing Manager’s Index on Thursday, well above the 50.0 figure that signals growth.

This has lifted the euro, because even though this figure was below December’s 60.6, January’s figure is still one of the highest in 20 years, and points to robust growth in Eurozone factories.

In particular, there was strong growth in the Eurozone’s 4 largest economies, namely Germany, France, Italy and Spain. This bodes well for the Eurozone’s GDP in 2018, and boosted the euro.

“The euro zone’s manufacturing boom continued in full swing in January,” said Chris Williamson, chief business economist at IHS Markit, about these manufacturing figures, thus lifting the euro too!

Euro strengthens, as ECB likelier to lift Eurozone interest rates

What’s more, the euro has also neared this 38-month high against the US dollar today, because the European Central Bank (ECB) now looks likelier to lift Eurozone interest rates.

The ECB may lift interest rates in the bloc above their current 0.0%, first because Eurozone factories lifted their prices at the fastest pace since mid-2011 in January, this boosting the euro.

The ECB may hike interest rates as factories raise their prices, because higher prices create inflation. In turn, higher interest rates are needed to combat inflation, thereby lifting the euro.

In addition, the euro has also climbed, because according to a new Reuters poll this week, leading economists think that the Eurozone’s central bank should lift interest rates sooner too.

Leading economists think that the ECB should end its emergency stimulus and hike borrowing costs, because the Eurozone economy continues to grow rapidly in early 2018, so helping the euro.

Given all this, the euro has neared this 38-month high against the US dollar today, and could continue to climb!

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Please bear in mind, this article is Pure FX’s opinion only and does not constitute advice. Moreover, the exchange rates referred to in this article are the interbank rates, which are the rates at which banks and financial institutions buy and sell currency to each other. Therefore these exchange rates cannot be accessed by individuals or SMEs, and are not the same rates that Pure FX can offer. To get a free exchange rate quote, call us on +44 (0) 1494 671800, or email peter.lavelle@purefx.co.uk.

References

1. Anonymous, “U.S. dollar keeps falling amid economic data”, February 2nd 2018, XinHauNet.com, http://www.xinhuanet.com/english/2018-02/02/c_136943068.htm
2. Graeme Wearden, “UK factory growth hits seven-month low, but eurozone powers on – as it happened”, February 1st 2018, Guardian.co.uk, https://www.theguardian.com/business/live/2018/feb/01/chinese-factory-manufacturing-uk-eurozone-markets-business-live
3. Lisa Twaronite, “Dollar poised for weekly loss despite higher U.S. yields”, February 2nd 2018, Reuters.com, https://www.reuters.com/article/us-global-forex/dollar-poised-for-weekly-loss-despite-higher-u-s-yields-idUSKBN1FM03T?il=0
4. Jonathan Cable, “Euro zone manufacturing boom rolls on into new year: PMI”, February 1st 2018, Reuters.com, https://www.reuters.com/article/us-eurozone-economy-pmi/euro-zone-manufacturing-boom-rolls-on-into-new-year-pmi-idUSKBN1FL4IN?il=0
5. Reuters Staff, “UBS revises up euro/dollar, bond yield forecasts”, February 1st 2018, Reuters.com, https://www.reuters.com/article/europe-markets-ubs/ubs-revises-up-euro-dollar-bond-yield-forecasts-idUSL8N1PR378
6. Stephanie Kelly, “Dollar falls again as euro rises on economic optimism”, February 1st 2018, Reuters.com, https://www.reuters.com/article/uk-global-forex/dollar-falls-again-as-euro-rises-on-economic-optimism-idUSKBN1FL3JL

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