Euro to US Dollar (EUR/USD) Exchange Rate Gains amid Fed Rate Hike Concerns
The Euro to US Dollar (EUR/USD) exchange rate achieved a high of 1.1820 on Friday after demand for the ‘Greenback’ was undermined by comments from a Federal Reserve official on the subject of US interest rate hikes.
Narayana Kocherlakota, President of the Federal Reserve Bank of Minneapolis, asserted that the Fed’s 2% inflation target would be pushed even further out of reach if the US increased borrowing costs in 2015.
Today’s US Non-Farm payrolls report could have a significant impact on the Euro to US Dollar (EUR/USD) exchange rate before the close of the European session.
Ahead of the release of the Eurozone’s Consumer Price Index and the publication of the minutes from the latest Federal Open Market Committee (FOMC) meeting, the Euro to US Dollar (EUR/USD) exchange rate was trading in the region of 1.1869 – unchanged on the day’s opening levels.
EUR/USD Exchange Rate Falls 0.4%
As the European session progressed and the Eurozone issued its inflation figures the Euro to US Dollar (EUR/USD) exchange rate shed 0.4% to trade in the region of 1.1826.
The Euro posted modest declines against almost all of its most traded currency counterparts as the Eurozone’s non-core CPI printed below expected levels, registering a figure of -0.2% rather than the -0.1% anticipated.
The data saw investors bet that the European Central Bank (ECB) will roll out further stimulus measures in the near further and caused an uptick in European stocks.
According to Alex Neil; ‘We are once again in ‘bad news is good news’ territory, with investors hoping that the likely poor CPI data will spur earlier action from the ECB. It’s reassuring to see the markets finally catch up a bit after a three-week bashing. But we’re entering a precarious few weeks for Eurozone politics, which I expect will offset any short-term inflationary revival hopes.’
Euro declines were a little restrained as the core measure of consumer price inflation came in above forecast.
However, further Euro to US Dollar (EUR/USD) exchange rate declines were registered after the US ADP Employment Change and Trade balance reports came in above forecast levels, helping to make up for yesterday’s softer services sector figures.
EUR/USD Exchange Rate Unmoved by German Employment Report
Although yesterday’s US services sector data printed below expected levels, the Euro to US Dollar (EUR/USD) exchange rate failed to derive any benefit.
Investors are still betting that the Federal Reserve is preparing to increase interest rates in the next few months and that the European Central Bank (ECB) intends to roll out quantitative easing at its January 22nd meeting, so the downtrend in the EUR/USD pairing persists.
The Euro to US Dollar (EUR/USD) exchange rate was little changed on Wednesday following the release of German retail sales and unemployment data.
The Euro to US Dollar (EUR/USD) exchange rate achieved a high of 1.1897
The retail sales data for the Eurozone’s largest economy printed at 1.0% on the month, smashing forecasts for a month-on-month increase of 0.2%, but showed an unexpected annual decline of -0.8%.
Meanwhile, the level of joblessness in Germany fell by 27,000 in December. A much smaller decline of 5,000 had been expected and the nation’s unemployment rate accordingly dipped from 6.6% to 6.5%.
While this result was fairly positive, Euro gains were incremental ahead of the publication of the Eurozone’s Consumer Price Index.
The Euro to US Dollar (EUR/USD) exchange rate fell to a low of 1.1852
The Euro to US Dollar (EUR/USD) exchange rate was also kept depressed by Germany’s Construction PMI and the Eurozone’s Retail PMI.
Germany’s Construction PMI hit 50.5 in December, down from 53.5 in November.
The Eurozone’s Retail PMI showed further declination in sales before the close of the year, with the index coming in at a two-month low of 47.6.
Euro to US Dollar (EUR/USD) Exchange Rate Forecast
As the European session progresses, Euro to US Dollar (EUR/USD) exchange rate movement could be caused by the Eurozone’s inflation report.
If annual inflation prints at or below -0.1% – as economists expect to be the case – it will intensify the pressure on the European Central Bank (ECB) to roll out stimulus measures and cause widespread Euro weakness.
EUR/USD exchange rate volatility could also be occasioned by the US MBA Mortgage Applications, ADP Employment Change and US Trade Balance figures.
The publication of minutes from the recent Federal Open Market Committee (FOMC) policy meeting could also prove influential.
If the minutes are hawkish in tone, or offer any indication of when interest rates might be increased, the Euro to US Dollar (EUR/USD) exchange rate could fall to fresh lows.
Current Euro (EUR) Exchange Rates
The Euro to US Dollar (EUR/USD) exchange rate is currently trading in the region of 1.1873
The US Dollar to Euro (USD/EUR) exchange rate is currently trading in the region of 0.8420
The Euro to Pound Sterling (EUR/GBP) exchange rate is currently trading in the region of 0.7842
The Pound Sterling to Euro (GBP/EUR) exchange rate is currently trading in the region of 1.2750