Euro (EUR) Exchange Rates Tick Higher
Euro exchange rates edged fractionally higher on Friday morning thanks to US Dollar weakness after weak US GDP data reduced the odds of a rate hike in June. However, Eurozone inflation data is likely to provoke significant volatility.
- Euro edges higher after positive German labour market data
- Pound Sterling holds position of strength despite weak house price data
- US Dollar continues to struggle after Yellen signals more rate hike delays
- Euro (EUR) exchange rates forecast to extend gains on soft US Dollar
Euro (EUR) Exchange Rate Forecast to Strengthen on Weak US Dollar
The Euro to Pound Sterling (EUR/GBP) exchange rate declined by around -0.2% on Thursday morning.
With the exception of a few assets, the Euro ticked higher versus most of its major peers on Thursday morning. The appreciation can be linked to positive domestic data results and a weak US Dollar.
April’s German Unemployment Rate held in line with economists’ prediction of 6.2%, but Unemployment Change showed the number of people out of work fell by -16,000. This represents the sharpest drop in joblessness since January.
Writing for Bloomberg, Piotr Skolimowski stated: ‘The reading signals that German economic growth is strong enough to prompt companies to tap into a pool of potential workers that is rising after the country admitted more than 1 million migrants in 2015. The labour market has been a cornerstone of the nation’s recovery, supporting domestic demand as exports waver in the face of a global slowdown.’
US Dollar (USD) Exchange Rates Forecast to Decline after Dovish Yellen Speech
The Euro’s appreciation can also be linked to the US Dollar’s comparative weakness. Although the Federal Open Market Committee (FOMC) kept rates unchanged, as had been expected by the majority of analysts, the accompanying press conference was dovish in tone.
Fed Chairwoman Janet Yellen urged patience with regards to rate hikes, signalling that policymakers were still not convinced it was the right time to tighten monetary policy against a backdrop of the global economic slowdown.
‘They could have been much more hawkish and flagged a June hike was likely, but they didn’t,’ said Dean Maki, Point72 Asset Management LP chief economist. ‘They deliberately chose not to push market expectations around.’
Also weighing on demand for the US asset was the Bank of Japan’s (BOJ) decision to avoid easing policy despite most economists’ expecting a rate cut.
Pound Sterling (GBP) Exchange Rates Continue to Advance Irrespective of Domestic Data
Despite the fact that the UK’s ecostats produced disappointing results on Thursday, the Pound Sterling continues to outperform most of its currency counterparts. The appreciation is the result of continued speculation that the UK will vote to remain in the EU on June 23rd.
April’s Nationwide House Prices failed to meet with the median market forecast growth on both a monthly and annual basis.
Robert Gardner, Nationwide’s chief economist, said: ‘This slowdown returns the annual pace of house price growth to the fairly narrow range between three and five per cent that had been prevailing since the summer of 2015. It may be that the surge in house purchase activity resulting from the increase in stamp duty on second homes from 1 April provided a temporary boost to prices in March.’
Euro (EUR) Exchange Rate Forecast to Extend Gains ahead of German Consumer Prices
The combination of positive reaction to German data and the weakening US Dollar should continue to support demand for the Euro. With that in mind, the EUR/USD exchange rate is likely to continue trending higher. However, the EUR/GBP exchange rate may hold losses with sentiment for Sterling very positive at present.
Later this afternoon the Euro could see significant changes in response to German inflation data. However, the result would need to be particularly negative to offset EUR/USD exchange rate gains. US Gross Domestic Product and Personal Consumption data will also be likely to provoke volatility.
The Euro to US Dollar (EUR/USD) exchange rate was trending within the range of 1.1294 to 1.1370.
The Euro to Pound Sterling (EUR/GBP) exchange rate was trending within the range of 0.7767 to 0.7799 during Thursday’s European session.