The Euro to US Dollar (EUR/USD) exchange rate rallied strongly at the end of the week as concerns over the situation in Greece eased after Athens promised its European creditors that it would deliver new and improved reform measures by the end of next week.
A string of weaker than forecast economic data releases in the USA and dovish comments by the Federal Reserve softened the ‘Greenback’ against a number of major peers. Policy makers revised down both their inflation and growth forecasts. Also weighing, were comments made by Fed chair Janet Yellen that suggested that the Fed might delay hiking interest rates until September.
At the start of the week, the EUR/USD exchange rate is forecast to soften as economists predict that US homes sales and a national activity index will show signs of improvement. Harsh winter weather had weighed upon activity in the housing sector but as the weather turns warmer activity is likely to have improved. A consumer confidence report out of the Eurozone meanwhile is forecast to have fallen from -6.7 to -7.69.
Tuesday, will see volatility due to the release of a number of Markit PMI reports for the Eurozone. Manufacturing activity is forecast to rise whilst activity in the service sector is expected to soften. The main event of the session will be the latest inflation data out of the USA. Also due for publication is Markit Manufacturing PMI and a Richmond Fed Manufacturing Index.
Midweek sees the publication of IFO data for Germany and durable goods orders out of the USA. The IFO data is forecast to show improvement. Also of interest for the US Dollar will be the publication of the latest weekly mortgage applications data which is forecast to show a sharp rally from the -3.9% decline seen previously.
Thursday will see the release of German consumer confidence data and French Gross Domestic Product (GDP) data. As the session progresses, the US Dollar could soften as the latest jobless claims data is forecast to show another weekly rise in the number of Americans filing for unemployment benefits. Also of interest will be manufacturing activity data released by the Kansas Federal Reserve.
As the week ends, the US Dollar is likely to go on to the retreat as economists predict that US GDP data will show that the world’s largest economy was weaker than initially estimated. The Euro meanwhile is likely to strengthen if a deal is reached regarding the Greece situation.
Events in the Ukraine could also influence the currency pair, any sign that the tentative ceasefire is breaking will likely put pressure on the single currency.
Also of interest for traders will be economic data out of Italy. Any signs that the nation is beginning to claw its way out of recession is likely to support the Euro.
The ECB’s quantitative easing programme is also set to influence the currency pair.