Earlier in the week many analysts were dismissing the impact of the forthcoming FOMC meeting minutes given that a recent speech from Federal Reserve Chairwoman Janet Yellen was fairly explicit on policy outlook. However, today has seen the US Dollar lose a lot of ground amid concerns that the minutes will show more FOMC members voted to hold rates than originally anticipated.
The Euro to US Dollar (EUR/USD) exchange rate is currently trending in the region of 1.1419.
Euro to US Dollar (EUR/USD) Exchange Rate Forecast to Decline on Mixed European Ecostats
The Euro to US Dollar (EUR/USD) exchange rate has declined by around -0.4% today.
European economic data produced a mixed-bag of results today. Whilst German Industrial Production bettered expectations in February, March’s Eurozone Retail PMI dropped below the 50 mark that separates growth from contraction.
In response to the positive German Industrial Production figure, economist Ralph Solveen said; ‘We do not assume that this marks the start of lastingly stronger economic growth. Order intake in the past months argues against the manufacturing sector sustaining over the long term its high production levels from the first two months of this year.’
One of the major factors weighing on demand for the single currency is signs of revitalised divergence trade. Even though Federal Reserve Chairwoman recently stated that the Fed will not look to hike rates until external risks from the slowing global economy have lifted, Fed policy outlook is still far tighter than that of the European Central Bank (ECB). Accounts of the latest policy meetings will be key to trader sentiment.
‘Investors are awaiting the release of both minutes for a final verdict on the fate of the currency decoupling trade,’ said Valentin Marinov of Credit Agricole. ‘The Fed minutes will be more hawkish than recent statements, whereas the ECB minutes will signal greater willingness to do more. The Euro should struggle to perform given the risks ahead; Greece as well as a lingering global growth slowdown.’
The Euro to US Dollar (EUR/USD) exchange rate is currently trending in the region of 1.1337.
US Dollar to Euro (USD/EUR) Exchange Rate Forecast to Hold Gains ahead of Mester Speech
US economic data is unlikely to be hugely impactful today. Even the publication of minutes pertaining to the most recent Federal Open Market Committee (FOMC) meeting will be unlikely to cause significant USD changes. This is because Fed Chief Janet Yellen has already made it very clear that the FOMC will not look to tighten policy until global economic conditions are more favourable.
One domestic ecostat with potential to cause changes is a speech from Federal Reserve official Loretta Mester. As one of the more hawkish Fed officials, after calling for a near-term rate hike irrespective of global conditions, Mester could provide even more upside support for US Dollar exchange rates.
US Crude Oil Inventories data will have a significant impact on the market and commodity-sensitive assets, but it is unlikely to be hugely impactful in terms of the provocation of US Dollar movement.
The Euro to US Dollar (EUR/USD) exchange rate dropped to a low of 1.1325 during Wednesday’s European session.
EUR/USD Exchange Rate Forecast: Yellen Speech in Focus
Over the coming days there will be comparatively few data publications likely to cause EUR/USD exchange rate changes. Trader focus will most likely be dominated by several speeches from Fed officials in New York late on Thursday evening. Of particular significance will be the contribution from Fed Chairwoman Janet Yellen.
Friday’s German Trade Balance data for February is likely to be the most significant European data release over the remainder of the week. However, divergence trading is very likely to be the main driver of EUR/USD exchange rate movement.
The Euro to US Dollar (EUR/USD) exchange rate reached a high of 1.1386 during Wednesday’s European session.