- Euro (EUR) Exchange Rates Mixed – Subdued market trade weighs on volatility
- US Dollar (USD) Exchange Rates Static – Lack of data to provoke changes
- EUR Forecast to Decline – Draghi initiates corporate bond purchases
- USD Predicted to Cool – Political developments to cause movement
US Mortgage Applications Soar, EUR/USD Exchange Rate Declines
The Euro to US Dollar (EUR/USD) exchange rate ticked lower by around -0.1% on Thursday morning.
With a complete absence of domestic data to provoke volatility, subdued market trade has seen the Euro trend statically versus the US Dollar in early trade during Wednesday’s European session. However, as the session progressed, heightened demand for high-yielding assets saw the US Dollar cool versus a number of its peers.
Even a massive 9.3% growth in US Mortgage Applications wasn’t enough to offset US Dollar losses. The Euro remains mixed versus its major peers, but a slight err towards negativity can be attributed to uncertainty surrounding the ECB’s bond-purchase programme.
On Thursday morning the EUR/USD exchange rate cooled, albeit fractionally, as traders react to the fact that the ECB purchased junk debt, fueling concerns that there are few bonds left available for President Mario Draghi to purchase.
The Euro to US Dollar (EUR/USD) exchange rate is currently trending in the region of 1.1387.
(Previously Updated 08/06/16 @ 15:12)
Mixed Euro (EUR) Exchange Rates Err Towards Depreciation on ECB’s Corporate Bond Purchases
There is a high chance that the Euro will edge lower versus a number of its major peers as the European Central Bank (ECB) begins to purchase corporate bonds.
Many analysts are concerned that the extension to quantitative easing by using corporate bonds will be ineffective, especially given the limited supply.
‘We’re worried that they won’t be able to buy quite as much as they want to,’ said London-based portfolio manager Tim Winstone. ‘If the buying underwhelms and reported volumes are less than most people expect, there is a risk of a selloff.’
Victoria Whitehead, senior portfolio manager at BNP Paribas, predicts that a lot will ride on the success or failure of the ECB’s undertaking;
‘There is a fair amount riding on this in terms of the ECB’s credibility. The perception is that if they can’t buy at least 5 billion Euros of bonds a month, the program will be seen as unsuccessful.’
The lack of common currency volatility thus far today can be linked to general uncertainty as to the size of corporate bond purchases the ECB intends to make.
‘So much depends on the sizes of the purchases, which the ECB has been vague about on purpose,’ said Societe Generale strategist Juan Esteban. ‘They might still be figuring out their approach.’
US Dollar (USD) Exchange Rates Steady but Will Political Uncertainty Reduce Appeal?
Hillary Clinton has become the first woman to run for president in US history, taking the helm of the Democratic Party to square up to opposition presidential candidate Donald Trump.
Political uncertainty remains rife in the US, however, given that Clinton remains deeply unpopular with a large proportion of US voters.
This would suggest that the presidential race will be very close given that controversial candidate Donald Trump has proven to be marmite with US citizens, although he has gained in popularity thanks to his stance on gun control and immigration.
Clinton and Trump have been openly critical of one another, with the former arguing that the latter is unfit to be president.
‘The stakes in this election are high and the choice is clear. Donald Trump is temperamentally unfit to be president and commander-in-chief,’ Clinton said. ‘When Donald Trump says a distinguished judge born in Indiana can’t do his job because of his Mexican heritage, or he mocks a reporter with disabilities, or calls women pigs, it goes against everything we stand for.’
EUR to USD Exchange Rate Forecast: Lack of Data Leaves Euro and US Dollar Vulnerable to Market Sentiment
Domestic data is unlikely to be hugely impactful on the US Dollar today given the lack of high-impact publications. US Crude Oil Inventories data may have an impact on the market as a whole, however. Traders will be looking ahead to Friday’s German inflation and US consumer confidence reports.
The Euro to US Dollar (EUR/USD) exchange rate was trending within the range of 1.1353 to 1.1380 during Wednesday’s European session.