The Euro to US Dollar (EUR/USD) Exchange rate weakened to its lowest level in three weeks on Friday as the American currency continued to receive support from hawkish Federal Reserve policy meeting minutes and Fed policy maker comments.
The Euro to US Dollar (EUR/USD) slumped to a session low of 1.0566 on Friday.
On Wednesday, New York Federal Reserve President William Dudley said; ‘I could imagine circumstances where a June rate hike could still be in play. If the economy’s strong, the unemployment rate is dropping, wages are rising, and the outlook is good, you could conceivably get to that point.’
The minutes from the Fed’s latest policy meeting also bolstered the ‘Greenback’ as they showed that Fed officials are split on when to hike interest rates. Interest rates in the USA have been held close to 0% since the tail end of 2008, when the global finance crisis fully kicked in.
‘Several participants judged that the economic data and outlook were likely to warrant beginning normalisation at the June meeting. However, others anticipated that the effects of the energy price decline and the Dollar’s appreciation would continue to weigh on inflation in the near term, suggesting that conditions likely would not be appropriate to begin raising rates until later in the year,’ the minutes said .
The ‘Greenback’ received further support after the Washington based Department of Labour reported on Thursday that the number of Americans claiming unemployment benefits fell in the week ending April 3rd. The number of claimants rose by 14,000 to 281,000. Economists had been forecasting for the claimant count to rise by 18,000 to 285,000.
Looking ahead to next week, the US Dollar is forecast to remain supported against the Euro, as concerns as to whether Greece will remain in the Eurozone look set to dominate sentiment. According to a report in The Times newspaper on Friday, Eurozone nations are making plans to boot Greece out of the currency bloc.
Also of importance to the EUR/USD exchange rate next week will be the release of US retail sales on Tuesday and the latest European Central Bank interest rate decision on Wednesday. The ECB is expected to leave interest rates unchanged at 0.05%. Perhaps of greater importance will be the ECB press conference. Economists will be interested to hear ECB President Mario Draghi’s views on how the Eurozone economy is performing.
Greece faces two other deadlines next week. On April 14 and 17 it has to pay back €1.2 billion.
If next week’s US data releases come in positively expectations for a June interest rate rise will increase and likely strengthen the US Dollar further.
Also of interest will be next Friday’s Eurozone inflation data.