Euro Exchange Rate Today: EUR/USD Really Should Have Rallied Higher, Eurozone Data Releases Have Anchored the Shared Currency

The euro pound exchange rate is 0.16 pct lower at 0.8343.
The euro Australian dollar exchange rate is a percent in the red at 1.4535.

Poor Eurozone data hampers any chance of a Euro rally

With the situation over in the US proving to be a real worry for global financial markets one would have expected the euro to have staged more of a rally against the US dollar.

That it hasn't done so can be explained in large part by the poor data we have seen coming out of the Eurozone today.

The German unemployment rate has now actually crept up from 6.8% to 6.9%.

Also weighing on the Euro today was the release of the German Markit Manufacturing PMI (Sep) which read at 51.1, markets had expected 51.3.

Now compare that to the UK's 56.7 and you begin to understand that despite the UK missing target it is well ahead of Germany.

Meanwhile in France the Manufacturing PMI came in at 49.8 - still in contraction territory.

Markit Manufacturing PMI (Sep) for Italy read at 50.8, below expectations of a reading for 51.

Beware: A US dollar comeback is inevitable

For those holding out for yet higher levels in the pound and euro vs US dollar exchange rate, beware.

We hear from the foreign exchange team at Deutsche Bank, lead by Bilal Hafeez, who says the tide is turning for the US dollar:

"The continued rise in US yields in the face of mixed data in recent months suggests that some form of normalisation in yields may be occurring.

The fact that yields were much higher before 2011 when the US economy was much weaker adds to the case, and suggests that as long as the Fed does not engage in additional QE, the trend has now turned. This is important for the dollar, which has been held back by the trend decline in real yields since 2008. With that trend turning, USD should be more able to appreciate against both G10 and EM."

We will be publishing the latest Deutsche Bank forex forecasts later on today.