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Euro Exchange Rate Rallies Strongly Against Pound and US Dollar, More Gains Forecast

It is amazing how quickly things change in the exchange rate market. On Tuesday, the Euro (EUR) was struggling as it received a beating from poor economic data releases out of Germany and the wider Eurozone, On Wednesday however; it was the turn of the US Dollar (USD) and Pound (GBP) to get a kicking.

Sterling Falls on Rate Hike Speculation

Earlier on Wednesday the Pound appeared to have found support against the Euro as data showed that unemployment in the UK fell to 6%, the lowest level recorded since 2008. The GBP/EUR exchange rate strengthened briefly to pull back above the 1.26 level before sliding sharply towards the 1.24 level,(a multi-month low) as underneath the positive headlines there were signs that the UK labour market is slowing.

Economists were not that impressed with the UK data as it still showed that wage growth in the growth remained painfully weak and combined with Tuesday’s shock fall in interest rates to spur a selloff of Sterling.

The data caused a number of economists to reassess their predictions as to when the Bank of England could raise interest rates. Many now believe that the Bank will choose to leave interest rates unchanged until the summer of 2015.

US Dollar Takes a Battering

Against the US Dollar, the Euro soared by over 1% to reach a three-week high as poor US economic data outweighed concerns over the weakness in the Eurozone. The EUR/USD advanced to its highest level since September.

The US Dollar weakened broadly against most of its major peers after data showed that retail sales in the world’s largest economy fell unexpectedly in September. According to the Washington based Commerce Department, sales dropped by 0.3%, a figure that was worse than the 0.1% dip expected by economists.

Another report showed that Producer Price Inflation in the USA fell by 0.1% last month, below forecasts for a rise of 0.1%.

Adding to the currency’s woes was a report released by the Federal Reserve of New York, which showed that its manufacturing index tumbled to its lowest level in six months. The index tumbled from September’s reading of 27.5 to 6.2.

Short Term Gains Forecast for Euro

The Euro could make further gains on Thursday if the Eurozone’s monthly Inflation rate rises to the forecasted figure of 0.4%.

A positive figure could ease some of the concerns over deflation and in turn bolster sentiment towards the single currency.

Balance of trade data however is widely expected to disappoint on the weakness of the German economy.

Euro Exchange Rate News:

[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
Euro,,US Dollar,1.2805 ,
Euro,,British Pound,0.7997 ,
Euro,,Australian Dollar,1.4527 ,
Euro,,Canadian Dollar,1.4413 ,

As of 15:40 pm GMT