The shared currency softened across the board on Tuesday after the ZEW Survey for German Economic Sentiment plummeted. Aiding the downtrend was speculation that Greece will not be able to unlock bailout funds before the nation runs out of money.
Euro to Pound Sterling (EUR/GBP) Exchange Rate Forecast to Edge Lower despite UK Deflation
The Euro to Pound Sterling (EUR/GBP) exchange rate softened by around -0.33% on Tuesday morning.
After the ZEW German Economic Sentiment index failed to meet with the median market forecast figure of 49.0 in May, with actual result dropping to 41.9, the Euro dived across the board. The single currency declination was initiated by heightened fears of a Greek exit from the Eurozone as the nation runs out of time to secure bailout funds. Unconfirmed reports of a proposal from the European Commission, which would see the relaxing of some austerity measures, only aided the downtrend as the likelihood that Germany will approve is slim-to-none.
The Pound, meanwhile, softened versus the majority of its most traded currency peers on Tuesday. This can be attributed to the fact that the UK’s Consumer Price Index fell into negative territory on the year in April. This is the first time since 1960 that the UK hit negative inflation rates. The report ‘reinforces belief that the Bank of England (BoE) will most likely hold off from raising interest rates until the second quarter of 2016,’ said Howard Archer, an economist at IHS Global Insight in London.
The Euro to Pound Sterling (EUR/GBP) exchange rate is currently trending in the region of 0.7206.
Euro to Australian Dollar (EUR/AUD) Exchange Rate Forecast to Soften despite Stronger US Dollar
The Euro to Australian Dollar (EUR/AUD) exchange rate dived by around -0.84% on Tuesday morning.
In response to the poor German data, ZEW President Clemens Fuest said; ‘Financial market experts have adjusted their optimistic expectations downward in May due to unexpectedly poor growth figures in the first quarter of 2015 and turmoil on the stock and bond markets. However, only a small number of survey participants actually expect a deterioration of the economic situation.’
The Australian Dollar softened versus most of its major peers on Tuesday as the result of US Dollar strength. The lack of demand for high-yielding assets was compounded by geopolitical tensions in Europe. Aiding the ‘Aussie’ (AUD) downtrend was a declination in March’s Conference Board Leading Index. Additionally, the Reserve Bank of Australia (RBA) published minutes from the most recent policy meeting which highlighted policymakers’ willingness to ease policy again to combat the high valued currency.
The Euro to Australian Dollar (EUR/AUD) exchange rate is currently trending in the region of 1.4049.
Euro to New Zealand Dollar (EUR/NZD) Exchange Rate Forecast to Plummet after NZ Inflation Expectation Edges Higher
The Euro to New Zealand Dollar (EUR/NZD) exchange rate cooled by around -1.50% on Tuesday morning.
In addition to the German ZEW Economic Sentiment Survey weighing on demand for the single currency, generally mixed domestic data results fuelled the downtrend. The Eurozone Consumer Price Index and Core Consumer Price Index met with the respective median market forecasts, but Eurozone Economic Sentiment dropped from the previous figure. In addition, the German ZEW Survey for the Current Situation dropped beyond the market consensus.
The New Zealand Dollar strengthened versus many of its major peers despite the strength of the US Dollar dampening demand for risk-correlated currencies. The appreciation can be linked to an upward revision of the RBNZ 2-year inflation expectation, which rose from 1.80% to 1.85% in the second quarter. The advance has caused traders to pare bets as to the timing of a Reserve Bank of New Zealand (RBNZ) benchmark interest rate cut.
The Euro to New Zealand Dollar (EUR/NZD) exchange rate is currently trending in the region of 1.5110.
Euro to US Dollar (EUR/USD) Exchange Rate Forecast to Dive ahead of US Housing Data
The Euro to US Dollar (EUR/USD) exchange rate dived by around -1.10% on Tuesday morning.
In response to the soft German ZEW Survey for Current Situation, Berenberg bank economist Christian Schulz said; ‘It may … be the case that investors expect Germany to have reached cruising altitude in terms of growth, with further improvements becoming less likely.’
Despite the fact that US data, once again, printed disappointingly on Monday, the ‘Buck’ (USD) advanced versus the majority of its most traded currency competitors on Tuesday. This is likely due to speculation that US data will print positively on Tuesday afternoon. April’s Building Permits is forecast to advance by 2.2% on the month, a significant improvement on March’s figure of -5.4%. Similarly, monthly Housing Starts are forecast to jump considerably by 9.9% in April, a large advance over the March figure of 2.0%.
The Euro to US Dollar (EUR/USD) exchange rate is currently trending in the region of 1.1200.