The Euro to US Dollar (EUR/USD) exchange rate recorded small gains at the beginning of Thursday’s European session, after losses on Wednesday from the Federal Open Market Committee (FOMC) announcement.
The Federal Reserve remained upbeat, causing investors to consider the possibility of a rate hike in 2015.
One trader stated: ‘The market wasn’t expecting any changes and they didn’t get any. [The FOMC] did say that inflation has softened a little but they don’t seem to think that [the US] will fall into deflation.’
Earlier… The Euro to US Dollar (EUR/USD) exchange rate fell in the second half of European trading ahead of the US Federal Open Market Committee (FOMC) announcements and German inflation and unemployment data.
Strategist Lee Ferridge commented on the FOMC announcement, stating: ‘The Fed still wants to put out the message we’re on this glide path to higher rates, but they will be worried about what goes on in the rest of the world. There are so many conflicting data, I don’t think we’ll see a lot of change.’
Earlier… The Euro to US Dollar (EUR/USD) exchange rate remained in a tight range on Wednesday ahead of the highly anticipated Federal Open Market Committee (FOMC) interest rate decision later in the day.
In the last statement, the Federal Reserve issued a slight language change, which saw the US Dollar climb. The ‘considerable time’ phrase used when discussing low interest rates was dropped and the desire for ‘patience’ amongst policymakers was inserted. The move saw investor sentiment in the ‘Greenback’ rise as speculation that the Federal Reserve was preparing to hike rates increased.
J.P Morgan chief global strategist David Kelly commented: ‘The inclusion of the phrase “patient” in the wording of the last statement was an acknowledgement that the Fed is considering when it should begin to raise rates while making it clear that such a decision isn’t imminent.’
‘The Fed is likely to stick with this language on Wednesday with the real FOMC battle occurring at the meeting, potentially in late April, when they decide to remove it. It will also be interesting to watch for dissenting opinions in the Fed statement.’
Weak Durable Goods Orders Pressure US Dollar (USD) Exchange Rate Lower
However, Tuesday saw the release of weaker than forecast US data, this time in the form of Durable Goods Orders. The figure contracted by -3.4% in December; a complete contrast to the +0.3% growth economists had forecast.
Conversely, US Consumer Confidence Rocketed to highs of 102.9 from 93.1 in January. Forecasts were for a gentler rise to 95.5.
The Durable Goods Orders ecostat weighed heavily on the US Dollar and the ‘Buck’ sank in response. Investor sentiment waned ahead of Wednesday’s FOMC announcement as some economists forecast 2016 rate increases rather than the previous 2015 prediction.
Kelly continued: ‘The Federal Reserve is not likely to rock the economic boat with its FOMC statement on Wednesday. The statement may well refer to the continuing weakness in wage growth and the decline in current inflation readings due to lower oil prices. ‘
‘However, it may also acknowledge the simulative effect of lower oil prices and continued improvement in the labour market.’
Euro to US Dollar (EUR/USD) Exchange Rate Forecast
So, what can the Euro to US Dollar (EUR/USD) exchange rate expect over the rest of this week? Both Thursday and Friday are potentially massive days for Euro exchange rate movement with the release of German and Eurozone Consumer Price Index stats as well as Unemployment Rate figures.
Any favourable data could see the Euro gain against other majors, whereas any downbeat figures could quash the common currency.
Friday could be a big day for the US Dollar to Euro (USD/EUR) exchange rate too, with US Gross Domestic Product (GDP) ecostats emerging. At present, annualised GDP growth is forecast to take a tumble in the fourth quarter of 2014, from 5.0% to 3.0%—an event that could be unfavourable for the bullish US Dollar.
The US Dollar to Euro (USD/EUR) exchange rate is hovering at 0.8791. The Euro to US Dollar (EUR/USD) exchange rate is trending in the region of 1.1380.