- ECB Freezes Rates – President Draghi confident in easing policies
- Eurozone Consumer Confidence Up – Follows Tuesday’s healthy economic sentiment
- US Jobless Claims Down – USD Boosted by positive job news
- Eurozone PMI in Focus – German data falls short of the mark
EUR/USD Looks to End Week Near a Three-Week-Low
The Euro to US Dollar exchange rate dropped by around -0.3% to trend at1.1245 during Friday’s session after poor Eurozone PMI data saw the shared currency in a definitively unfavourable position as the week drew to an end.
The Eurozone’s preliminary April Manufacturing, Services and Composite PMI scores printed at 51.5, 53.2 and 53.0 respectively, all 3 major scores releasing worse-than-expected and sending the Euro downward in many major pairings.
The weak US Dollar’s gains were also slowed by its own recently-released preliminary Manufacturing PMI report, which came in at a disappointing 50.8 despite forecasts that it would rise from 51.5 to 52.0.
The Euro to US Dollar (EUR/USD) exchange rate fell back towards the week’s opening levels of 1.1284 during Wednesday’s session as nerves towards the European Central Bank (ECB) meeting dominated investor movements.
Besides a brief but sharp jump of around 100 pips in the middle of the day’s session, the pair has largely traded flatly. At the time of writing, it trends narrowly in the region of 1.1295.
European Central Bank (ECB) Decides to Freeze Rates Through April, May
After March’s ECB rate decisions shocked global markets, investors approached the Euro (EUR) this week with considerable caution as they feared ECB President Mario Draghi’s ‘bazooka’ may have more surprises in store.
The easing measures had been put into place to stimulate the Eurozone’s economy, but the central bank revealed today that no further measures would be taken at this time – meaning Euro markets could begin to calm until the next decision in June.
At the press conference that took place after the ECB’s decisions, Draghi instead focused on defending the ECB’s current methods from critics. Bloomberg reports;
“Our monetary-policy measures have been supporting growth,” Draghi said. “With rare exceptions, monetary policy has been the only policy in the last four years to support growth.”
While he acknowledged that low rates are squeezing pension funds in countries such as Germany, he said the 25-member Governing Council was unanimous in agreeing the ECB is acting within its mandate.
“We have a mandate to preserve price stability for the whole of the euro zone, not only for Germany,” he said. “We obey the law, not the politicians, because we are independent.”
The ECB President adopted a generally defensive, but confident, tone as he reminded markets of the ECB’s task at hand. This follows a series of criticisms lumped on the bank by a German finance minister earlier this month.
Eurozone confidence was also revealed as improving more-than-expected during Thursday’s session, releasing at -9.3 and beating out forecasts of -9.5.
US Dollar (USD) Strengthens on Jobless Claims News after Poor Data Week
The ‘Greenback’ suffered against many of its rivals this week as Federal Reserve dovishness and poor data weighed on the currency. As the Euro has also been weak, EUR/USD has largely traded narrowly since the week opened, with slight movements in the Euro’s favour.
However, appetite for the US Dollar recovered on Thursday afternoon when jobless claims data scored far better than forecasts, allowing the ‘Buck’ to push back against a sudden rally from the shared currency.
The amount of new jobless claims were initially predicted to have worsened from 253k to 265k as of April 16th, however today’s print showed that only 247k new claims were made, almost 20k less than expected.
This is reflected by the amount of continuing claims being well down, at 2.137m from 2.176m. February’s house price index report also scored 0.4% as expected.
Unfortunately, not all US data was positive and likely weighed on the Dollar’s chances of pushing the Euro down further.
Philadelphia Fed’s latest manufacturing survey, for example, scored a bearishly disappointing -1.6 down from 12.4, after forecasts it would only worsen to 8.9. March’s leading indicators data also only grew by 0.2%, disappointing projections of 0.4%.
Euro to US Dollar Exchange Rate Forecast: EUR/USD to Move on Friday’s PMI Reports
Investors remain wary of both the EUR and USD currencies after the ECB’s announcements and US data give hope to investors without leaving either as the clear preferred choice.
As a result, with only Eurozone data due for release tomorrow morning, EUR/USD is most likely to see definitive movement following this upcoming preliminary PMI set – though mixed data could potentially see the pair running flatly into the weekend.
April PMI for both Germany and the Eurozone is currently tipped to improve slightly across the board, with Germany’s key composite figure expected to grow from 54.0 to 54.2, and the Eurozone’s composite projected to increase from 53.1 to 53.3.
Printing above expectations is likely to encourage investors to take ECB President Draghi’s confidence in his easing measures to heart, and may improve Euro sentiment. Worse-than-expected scores however could leave USD the favourable picking.
Lastly this week’s session is concluded by US’ preliminary Manufacturing PMI, currently expected to improve from 51.5 to 52.0.
The Euro to US Dollar (EUR/USD) exchange rate currently trends in the region of 1.1295, while the US Dollar to Euro (USD/EUR) exchange rate trades around 0.8849.