Euro to US Dollar (EUR/USD) Exchange Rate Steady before FOMC Minutes
While today’s Eurozone inflation data, which showed that the region entered deflation, inspired some movement in the Euro to US Dollar (EUR/USD) exchange rate, the pairing could also experience volatility after the Federal Reserve publishes the minutes from its latest policy meeting.
At its last gathering the Federal Open Market Committee (FOMC) revised its interest rate rhetoric, so the minutes from the meeting could prove to be hawkish in tone.
Any hints regarding the first increase in US borrowing costs could drive the Euro to US Dollar (EUR/USD exchange rate lower.
The Euro to US Dollar (EUR/USD) exchange rate is currently trending in the region of 1.1865
EUR/USD Exchange Rate Trends Lower despite US Data Falling Short
Although the US Services/Composite PMIs, Factory Orders figures and the ISM Non Manufacturing Composite measure all fell short of expected levels, the Euro to US Dollar (EUR/USD) exchange rate continued trending in a weaker position as the European session progressed on Tuesday.
The EUR/USD pair prepared to post a daily decline of over 0.2% after brushing a low of 1.1881 earlier in trading.
EUR/USD Exchange Rate Down 0.3%
Ahead of the publication of the US Markit Services PMI and ISM Non-Manufacturing report, the Euro to US Dollar (EUR/USD) exchange rate was trading 0.3% lower.
Demand for the common currency remained limited as final services/composite PMI’s for the Eurozone indicated that the region expanded at the slowest pace for over 12-months in the final three months of the year.
The PMI report saw Markit economist Chris Williamson note; ‘Of greatest concerns are the ongoing downturns in France and Italy, alongside the stuttering performance seen in Germany. Any signs of life, with Ireland and Spain most notable in seeing their best growth spells since the global financial crisis, are in danger of being extinguished by malaise spreading from the region’s largest economies unless business and consumer confidence revives.’
The Euro to US Dollar (EUR/USD) exchange rate hit a low of 1.1893 and could post additional losses if the day’s US reports impress.
EUR/USD Exchange Rate Tumbles on German Inflation
The Euro to US Dollar (EUR/USD) Exchange Rate began the European session trading in the region of a nine-year low.
The common currency had a bad start to the New Year as Greek political concerns and speculation surrounding European Central Bank (ECB) stimulus saw investors ditch the Euro.
Last week ECB President Mario Draghi intimated that the central bank is prepared to alter the size and composition of its asset purchases in order to shore up the Eurozone’s flagging economic recovery and defend against deflation concerns.
As well as plummeting against the US Dollar, the Euro fell to a multi-year low against the Pound.
On Monday the Euro to US Dollar (EUR/USD) exchange rate shed an additional 0.4% to trend in the region of 1.1958 US Dollars.
The prospect of upcoming Eurozone inflation data showing the first year-on-year decline in over five years piled additional pressure on the common currency. As economist Jacques Cailloux noted; ‘Downside surprises on inflation are far from over. That’s probably going to be the very important theme for the year.’
The German inflation report saw economist senior economist Christian Schulz assert; ‘For the ECB, such low inflation rates in Germany should make it easier to argue the case of further monetary easing.’
Broad-based US Dollar strength also had an impact on the EUR/USD pairing.
As the European session continued, the Euro extended its daily decline against the US Dollar to almost 0.6% as Germany’s inflation figures came in below forecast.
Germany’s Consumer Price Index showed price gains of just 0.1% on the month in December. An increase of 0.2% had been expected. On the year the pace of German inflation stood at 0.2% last month, down from 0.6% in November and lower than the 0.3% forecast.
This result doesn’t bode well for the Eurozone’s own CPI, due out on Wednesday.
Euro to US Dollar (EUR/USD) Exchange Rate Forecast
The Euro to US Dollar (EUR/USD) exchange rate is likely to continue trending lower in the hours ahead.
The Federal Reserve’s John Williams’ comments on the US economy could cause some EUR/USD movement, but investors are more likely to be looking ahead to tomorrow’s final Services/Composite PMI’s for the Eurozone and its largest economies.
The US ISM Non-Manufacturing Composite report will also be influential. Strong data for the US, or disappointing revisions for the Eurozone, may see the EUR/USD exchange rate move towards fresh lows.
The Euro to US Dollar (EUR/USD) exchange rate is currently trending in the region of 1.1924
The US Dollar to Euro (USD/EUR) exchange rate is currently trending in the region of 0.8383
The Euro to Pound Sterling (EUR/GBP) exchange rate is currently trending in the region of 0.7835
The Pound Sterling to Euro (GBP/EUR) exchange rate is currently trending in the region of 1.2759