Following the publication of minutes from the Federal Open Market Committee’s December meeting, at which it shocked investors by opting to taper stimulus by 10 billion Dollars, the Euro was able to move away from an almost five-week low against the ‘Greenback’.
As markets had been hoping that the minutes would reveal the central bank’s next policy manoeuvre, their cautiously optimistic tone and limited scope failed to boost the US Dollar.
Although the Euro spent the first half of the week fluctuating as investors digested a stream of influential economic reports for the Eurozone (including a slightly disappointing inflation report for the currency bloc) the common currency advanced yesterday thanks to surging retail sales and German factory orders figures.
This morning the Euro received support from the expectation that today’s confidence reports for the Eurozone will show improvement.
The gauge of economic confidence is forecast to climb from 98.5 to 99.1 while consumer confidence held at -13.6.
Of course investors are also focusing on today’s European Central Bank rate decision.
While deflation concerns and unemployment issues remain, the Eurozone’s tentative recovery appears to be continuing so the ECB is expected to leave rates unaltered.
As London-based currency strategist Jane Foley observed; ‘I don’t think anyone is seriously anticipating that the ECB will cut rates today. Underlying that perception is a feeling that the tools they have aren’t particularly valuable right now. That will support the Euro.’
A surprise decision could trigger extreme Euro volatility.
During the second half of 2013 the possibility of introducing negative interest rates was bandied about by the ECB, piling pressure on the Euro, but the central bank has so far refrained from imposing this controversial measure.
The EUR/USD pairing is also likely to respond to today’s US continuing claims and initial jobless claims figures.
Although news from the Eurozone will be a major cause of EUR/GBP movement, fluctuations may also be inspired by the Bank of England’s rate decision.
Euro (EUR) Exchange Rates
As of 08:55 GMT
The Euro/US Dollar Exchange Rate is currently in the region of: 1.3599 >
The Euro/Pound Sterling Exchange Rate is currently in the region of: 0.8259 >
The Euro/Australian Dollar Exchange Rate is currently in the region of: 1.5321 >
The Euro/ New Zealand Dollar Exchange Rate is currently in the region of: 1.6456 >
The Euro/ Canadian Dollar Exchange Rate is currently in the region of: 1.4717 >