- Bullish German Unemployment Change – Solid shift despite expected stagnation
- Fed Hints at Rate Hikes – Rates could rise as soon as June
- US Rates Frozen – FOMC policy announcement largely as expected
- Eurozone GDP, Employment Figures Impress – EUR supported
EUR/USD Advances to New Three-Week-High
In what has been a full week of Euro advances, the Euro to US Dollar exchange rate is up around 0.7% during Friday’s session and traded at around 1.1435. The pair has gained over 200 pips throughout the week.
Poor data released on Friday continued to push down the US Dollar, including March’s personal spending datasets which printed below expectations and the final April University of Michigan confidence release which showed a low score of 89.0 – well undermining both forecasts of 90.0 and the previous score of 89.7.
The optimistic personal income score of 0.4% was not nearly enough to help the US Dollar hold its ground against the Euro, which was strengthened by Eurozone unemployment and GDP figures.
March’s unemployment rate of 10.2% beat out forecasts and the key year-on-year GDP result maintained a healthy 1.6% despite predictions that it would slow to 1.4%.
However, Friday’s poor Eurozone CPI of -0.2% may hold down the Euro going forward as investors react to the possibility that deflation could lead to more extreme ECB easing measures.
The Euro to US Dollar (EUR/USD) exchange rate continues on the road to recovery this week after falling to a near-month-low at the end of last week’s session, as positive Eurozone data reignites the Euro and negative US data holds the ‘Greenback’ down.
EUR/USD reached a new weekly high of 1.1361 during Thursday’s session after a brief attempt from the US Dollar to regain ground. The pair dipped to a low of 1.1301 early on Thursday morning, but recovered and is currently up almost 0.2%, trending in the region of 1.1346.
Euro (EUR) Solidifies Gains on Positive German Data
While the week has thus far been quiet for general Eurozone data, reports from the Eurozone’s biggest economy – Germany – have been consistently positive and largely above expectations.
The data has restored confidence in Euro traders after rows between German Finance Minister Wolfgang Shauble and the European Central Bank (ECB) seemed to imply that the German economy was struggling due to the ECB’s recent policies.
However, this week’s data (including GfK’s consumer confidence survey as well as key unemployment figures) indicated that the economy was in good health, a trend investors would certainly like to see in Thursday afternoon’s German CPI release.
Thursday morning’s German unemployment rate came in at 6.2%, matching forecasts that the rate would hold steady after March’s 6.2%.
The unemployment change report, on the other hand, printed a surprisingly bullish change of -16k despite being forecast to have stagnation of 0k.
This comes after Wednesday’s GfK consumer confidence survey scored 9.7 going into May.
US Dollar (USD) Attempts to Hold Ground as FOMC Decision Boosts Rate Hike Bets
Wednesday evening saw the latest Federal Open Market Committee (FOMC) rate decision, and the announcement of the key rates went largely as analysts expected, with rates being frozen until the FOMC’s next gathering in June.
However, investor confidence in the US Dollar improved despite this week’s slew of underwhelming US data after the Fed took a more optimistic tone towards the near future of economic growth. The Guardian reports;
‘Signalling faith in the strengthening US economy, the Fed’s policy-setting committee softened its language regarding the global economy’s impact and implied openness to raising interest rates in the near future.’
While still considered unlikely, the Fed’s more optimistic shift of tone has led to CME Group Fedwatch increasing the chances of a June rate hike from 2% to 22%, and the perceived increased likelihood of a rate hike boosted sentiment towards the ‘Greenback’.
It’s likely the US Dollar was not strong enough to completely beat out the Euro’s advances due to highly important US data this week scoring poorly, such as Tuesday’s low consumer confidence score of 94.2.
Euro to US Dollar (EUR/USD) Exchange Rate Forecast: Investors Adjust Ahead of German CPI and US GDP
While currently moving in the Euro’s favour, it’s highly possible that EUR/USD movement could be entirely reversed later on today on German Consumer Price Index (CPI) releases and key US data including Gross Domestic Product (GDP).
With the day’s most vital data due for released in the early afternoon, EUR/USD will likely feel the effects for the remainder of the day and into Friday’s session.
For example, if Germany’s CPI prints dovishly and US GDP prints hawkishly, the exchange rate’s movement could reverse completely in favour of the ‘Buck’.
The US also sees personal consumption and jobless claims data due alongside its GDP, giving it more ammo to slow the Euro’s ascent.
Friday also looks to be a busy day for the EUR/USD pair, with Eurozone unemployment and CPI figures due for release in the morning and US University of Michigan confidence survey out in the afternoon.
The Euro to US Dollar (EUR/USD) exchange rate currently trades at around 1.1346, while the US Dollar to Euro (USD/EUR) exchange rate trends within the region of 0.8812.