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Euro to US Dollar (EUR/USD) Exchange Rate Drops on Fed Rate Forecasts; Richard Fisher in Focus, ECB’s Draghi Speaks in Frankfurt

Euro Exchange Rates Today

The Euro to US Dollar (EUR/USD) exchange rate declined in the second half of Wednesday’s European session as investors price in a US Federal Reserve interest rate hike in the near future.

Earlier… The Euro to US Dollar (EUR/USD) exchange rate was trending in a narrow range on Wednesday as European Central Bank (ECB) President Mario Draghi spoke in Frankfurt.

Draghi began defending the central bank’s decision to begin quantitative easing after some experts had criticised the decision.

Earlier… The Euro to US Dollar (EUR/USD) exchange rate sank in the first half of Tuesday’s European session as monetary policy divergences from the Federal Reserve and European Central Bank (ECB) forced the currency pair to trend lower.

The European Central Bank began a period of quantitative easing (QE) on Monday in an attempt to revive growth in the 19-nation currency bloc. However, some economists have suggested that the ECB may struggle to find enough bonds to buy as the 1.1 trillion Euro plan gets underway.

Strategist Michael Leister commented: ‘Near-term it’s going to stay quite volatile because there are some sellers who did front-run these purchases and now are keen to sell. But overall we think the dominant theme will be this theme of scarcity.’

Meanwhile, as the ECB loosens monetary policy, the Federal Reserve appears to be edging closer to tightening US stimulus measures.

Fed’s Fisher Causes US Dollar to Euro (USD/EUR) Rally with Rate Hike Forecasts

Monday’s US session saw the ‘Greenback’ gain as investor sentiment rose following Federal Reserve speeches. Dallas Fed President Richard Fisher suggested that the central bank should begin to increase interest rates as slack in the labour market tightens.

Fisher commented: ‘The idea that we can substitute a steeper future funds-rate path for an early liftoff seems risky to me. I would rather the FOMC [Federal Open Market Committee] raise rates early and gradually than late and steeply.’

Friday saw US Change in Non-Farm Payrolls record the creation of a massive 295K jobs—far more impressive than the 235K forecast. In addition, the US Unemployment Rate dropped from 5.7% to 5.5%. The US Dollar to Euro (USD/EUR) exchange rate surged while the ‘Buck’ hit highs against a host of other majors.

The US Dollar to Euro (USD/EUR) exchange rate hit an 11-year high on Tuesday on the monetary policy divergence as the US houses potentially one of the only central banks to be in the running to hike rates this year. The EUR/USD currency pair slipped to $1.0785, its lowest level since September 2003.

Euro to US Dollar (EUR/USD) Exchange Rate Forecast

The Euro to US Dollar (EUR/USD) exchange rate is likely to continue trending lower on Tuesday as investors’ price in US rate hikes in the near future. However, ECB officials are expected to speak throughout Tuesday’s session and their comments could influence Euro movement.

Wednesday could heat up EUR/USD trading with ECB President Mario Draghi speaking and US MBA Mortgage Applications and Monthly Budget Statement stats due for release.

The US Dollar to Euro (USD/EUR) exchange rate is trading at 0.9304. The Euro to US Dollar (EUR/USD) exchange rate is trending in the region of 1.0751.