- EUR USD Falls following ECB Meeting – ECB votes to leave monetary policy unchanged.
- Eurozone PMI Data – Euro rises following better than predicted PMIs.
- Fed Hike Bets in Focus – US Dollar remains strong as bets rise for a December rate hike.
- Eurozone Data Ahead – German economy to drive the Euro this week.
The EUR USD exchange rate continued its downtrend last week as the currency pairing slid closer to parity after falling by around a cent.
The Euro (EUR) is now trading at its lowest point since March against the US Dollar.
Uneventful ECB Meeting Drags on Euro (EUR) US Dollar (USD) Exchange Rate
The Euro continues struggling against the US Dollar (USD) after the European Central Bank (ECB) voted to leave its current ultra-loose monetary policy unchanged at its most recent meeting last Thursday.
The Euro had stabilised against the US Dollar ahead of the meeting following reports that the ECB was contemplating tapering its quantitative easing programme earlier than expected.
The EUR USD exchange rate even managed to advance at one point as ECB President Mario Draghi said that the bank had not discussed extending its bond-buying policy, although it plummeted shortly afterwards as he said that ECB policymakers had also not spoken about tapering it either. Draghi intimated that the bank wanted to remain flexible in the face of global financial uncertainty.
Eurozone PMIs Allow Euro to Pressure US Dollar (EUR USD)
The Euro was able to recover some of its early losses against the US Dollar (EUR USD) at the beginning of the week’s session thanks to better than expected Eurozone PMIs.
The Eurozone manufacturing PMI rose to 53.3, surging past forecasts of 52.7, while the services PMI also outperformed predictions of 52.4 – s reaching 53.5 in October.
The PMI report also showed that businesses in the Eurozone had begun hiking prices this month for the first time in a year. As Markit says;
‘With demand firming, companies were increasingly able to charge higher rates to customers. Average prices charged for goods and services rose for the first time since August 2015.’
US Dollar Remains Strong in Face of Rising Bets on a Fed Rate Hike
The Euro’s gains following the positive Eurozone PMI reports are likely to hindered by the strong US Dollar, which continues to be strengthened by the improving odds that the Federal Reserve will raise US interest rates in December.
Despite a lacklustre week for US ecostats, rate expectations continued growing following a speech from New York Fed President William Dudley on Wednesday and the perceived collapse of Donald Trump’s presidential bid following allegations of sexual misconduct over the last couple of weeks. These developments helped stabilise the US Dollar.
EUR USD Exchange Rate Forecast: German Data to Drive the Euro
The Euro to US Dollar (EUR USD) exchange rate is likely to be closely connected to the German economy this week as almost all of the remaining Eurozone data will originate from Germany.
The most significant piece of data will be the German consumer price index at the end of the week which is predicted to see German inflation firm slightly from 0.7% to 0.8% in October, although should it perform similarly to today’s PMI data then the Euro may be able to push further away from parity with the US Dollar.
Meanwhile in the short term today will also see the release of the US manufacturing PMI report. This is expected to remain unchanged at 51.5, and an as-forecast result may allow the Euro to build on its recent gains.
Current Interbank Exchange Rates
At the time of writing the EUR/USD exchange rate was trending around 1.08 and the USD/EUR exchange rate was trending around 0.91.