- EUR USD Exchange Rate Falls Following ECB Meeting – Reaches lowest levels since March.
- Eurozone Consumer Confidence – Expected to see a slight rise.
- US Dollar Strengthened by Data – Positive home sales help boost USD
- Fed Rate Hike – Traders continue betting on December rate hike from Fed.
The EUR USD exchange rate tumbled by around a cent yesterday as the Euro (EUR) was weakened by an uneventful ECB meeting, causing the currency pairing to creep ever closer to parity.
Euro (EUR) US Dollar (USD) Exchange Rate Tumbles Following Dovish ECB Message
EUR USD plummeted to its lowest level since March yesterday as the European Central Bank (ECB) voted to leave its current aggressively low interest rates unchanged in October’s ECB policy meeting.
Some investors had predicted that the ECB may share the intention to taper its quantitative easing programme earlier than planned in light of the recent uptick in Eurozone inflation, but were left disappointed following a dovish statement from the bank.
The Euro did spike by around half a cent momentarily as ECB President Mario Draghi mentioned in his speech later that afternoon that the bank had not discussed extending its QE programme. However it quickly preceded to nosedive as he continued to say that the bank had also not discussed tapering its bond buying either.
US Dollar Strengthened by Fed Rate Hike Bets
The Euro US Dollar exchange rate continues to be pressured by increasing bets that the Federal Reserve will hike interest rates in December.
Despite some lacklustre US data over the last week short-term US rates now believe that there is around a 75% chance of the Fed raising borrowing costs later in the year.
The recent increase is attributed to a decline in economic outsider Donald Trump’s polling numbers in the US election and recent comments from New York Fed President William Dudley, as he said on Wednesday ‘if the economy stays on its current trajectory I think … we’ll see an interest rate hike later this year’.
Euro US Dollar Currency Pairing Pressured by US Home Sales
A better than expected home sales report from the US helped end the recent trend of largely underwhelming data from the US economy over the past week, allowing for further advances in the USD EUR exchange rate.
Existing home sales surged to 3.2% in September, a notable increase over expectations of 0.4% and the largest single month increase since March.
At 9.7 the Philadelphia Fed manufacturing index also performed better than expected as it beat predictions of 5.0, however it still marked a decline from 12.8 the previous month.
EUR USD Exchange Rate Forecast: Eurozone Consumer Confidence May Help Euro to Rally
The Euro to US Dollar exchange rate may trend slightly higher this afternoon if the Eurozone consumer confidence report performs notably better than expected.
More than likely however is that the data will trigger little movement between the Euro and US Dollar as yesterday’s ECB decision remains the main driving force behind the currency pairing.
A lack of US data will likely mean that the ‘Greenback’ will also struggle to strengthen any further, causing EUR USD to trade fairly flatly for the remainder of the week.
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 0.90.