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EUR USD Exchange Rate Forecast: Euro Rally Paused before ECB Decision

  • EUR USD Weakened by US Inflation Data – US Dollar advances on positive report.
  • Euro Volatile over ECB Speculation – Draghi under pressure to wind down QE.
  • Eurozone Construction Output – Euro dented by disappointing data.
  • US Housing Data – USD may gain on positive reports.

The EUR USD exchange rate tumbled last night after positive US inflation was able to reverse some of the Euro’s (EUR) gains over the last couple of days, but the pairing remains volatile on speculation of an early end to the ECB’s stimulus efforts.

Euro US Dollar (USD) Exchange Rate Rally Short Lived

The US Dollar (USD) strengthened yesterday following positive a US consumer price report. Data showed that US inflation rose to 1.5% in September, a noticeable increase from August’s 1.1%.

While the data did not beat expectations, the rise still helped to increase bets of a December rate hike from the Federal Reserve, one of the major factors currently driving demand for the ‘Greenback’.

The gains will be welcome news for the US Dollar as it has struggled against the Euro over the past couple of days after some lacklustre domestic ecostats.

ECB Speculation May cause EUR USD Volatility

The Euro US Dollar exchange rate has seen some volatility today as markets continue to speculate on whether the European Central Bank (ECB) will taper its quantitative easing programme early.

The ECB initially planned to begin winding down QE in March 2017 but there has been significant speculation that it may bring this stimulus method to an early end following some positive signs of inflation.

While the ECB is unlikely to make any policy changes when it meets tomorrow, ECB president Mario Draghi should expect some difficult question during his press conference on when QE tapering may begin.

Conversely, some analysts predict that the ECB may even back an extension the QE programme in an attempt to bolster inflation, something which would likely anger German banks which have largely been against the ECB’s bond-buying since the beginning. Any visible rift between the ECB and the Eurozone’s largest economy may cause the Euro to weaken.

Weak Construction Date causes Setback for Euro (EUR) Exchange Rates

Euro (EUR) exchange rates were weakened today by a report showing a slowdown in Eurozone construction output in August, with output falling to -0.9% from 1.8% the month before.

This is likely to drag on the Euro today as it constitutes the sole piece of data set to be released from Europe and was the only chance for the Euro to counteract a slew of US data in the afternoon.

EUR USD Exchange Rate Forecast: US Housing Data Like to Pressure Currency Pairing

The Euro to US Dollar (EUR USD) exchange rate may soften later today as the US releases its Housing Starts report for September, which is expected to surge from -5.8% in August to 2.9% while building permits are also expected to rise from 0.7% to 1.1% month-on-month. However should the data mirror the performance of recent US ecostats and prove to be underwhelming, then the single currency might be able to advance on the US Dollar once again.

Traders will also be interested in today’s speech from the Fed’s Dudley Williams as they look for any signals on how November’s Fed vote will go and consider the likelihood of a December rate hike.

Current Interbank Exchange Rates

At the time of writing the EUR/USD exchange rate was trending around 1.09 and the USD/EUR exchange rate was trending around 0.91.