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Euro to US Dollar (EUR/USD) Climbs to 1-week High as US Data Increases Fed Rate Rise Doubts

The Euro to US Dollar (EUR/USD) exchange rate  rallied to its best level in a week against the US Dollar as another bout of disappointing economic data out of the world’s largest economy increased speculation that the Federal Reserve will choose to not hike interest rates in June but instead raise them at the tail end of 2015.

The Euro to US Dollar (EUR/USD) Exchange Rate Hit A Session High of 1.0768

Data released by the Washington based Department of Commerce showed that the number of building permits granted in March fell to a seasonally adjusted annual rate of 1,039,000. The figure was 5.7% below the preceding month’s revised rate of 1,102,000.

The data also showed that the number of US housing starts rose by 2% in March to climb to 926,000 units from the previous month’s figure of 908,000 units. The figure was well below economist forecasts for a rally of 15.9% to 1.040 million.

A separate data released published by the Labour Department also weighed heavily upon the ‘Greenback’. The report showed that the number of Americans filing for initial unemployment benefits increased by 12,000 last week, the rise was well above the fall of 2,000 forecast by economists.

Jobless claims data tends to be volatile at this time of year due to the release of holiday such as Easter. The break often disrupts the model used by the US government to iron out seasonal fluctuations.

Following the release of the disappointing US economic data the Euro took full advantage of the weakened US Dollar.

Bets for a Grexit Rise

Despite the gains it achieved, the single currency is forecast to remain under considerable pressure over the coming sessions as concerns over Greece continue to build.

‘The cost of insuring against a default by the Greek government has spiked sharply higher as worries about the ability to meet debt repayments have intensified. Credit default swap prices, which provide investors with protection to insure against debt default, have surged higher. The CDS market is now implying a 77% probability of default by the Greek government in the next five years, according to Markit data,’ said Markit’s chief economist Chris Williamson.

The situation in Greece looks set to worsen after a number of betting agencies closed their books on bets that the nation will be forced out of the Eurozone.

‘The Greek crisis has reached a new crunch point amid signs that the Eurogroup will not grant desperately needed financial aid after next week’s meeting. Greece might resort to IOUs and/or capital controls to avoid a disorderly default and keep the banks afloat for now. But such measures would offer a temporary solution at best and could be the first steps towards a Euro-zone exit,’ said Jennifer McKeown an analyst from Capital Economics.

The Euro could give up some ground on Friday if the latest Eurozone Inflation data comes in poorly. Also of interest will be US inflation and preliminary consumer sentiment data.