The Euro to US Dollar (EUR/USD) exchange rate was trending higher on Friday ahead of US and Eurozone Consumer Price Index stats.
Earlier… The Euro to US Dollar (EUR/USD) exchange rate has been trending lower after credit ratings agency Standard & Poor’s downgraded Greece’s sovereign credit rating and warned of the prospect of economic, financial and business conditions worsening if talks between the nation and Eurozone financial heads don’t come to a swift resolution.
Euro (EUR) Exchange Rate Sinks to Lows versus Pound (EUR/GBP) and US Dollar (EUR/USD)
The Euro has been through the ringer this year, with the Pound Sterling to Euro (GBP/EUR) exchange rate climbing to seven-year highs and the Euro to US Dollar (EUR/USD) exchange rate hitting 12-year lows.
And what’s the reason for the Euro’s swings? It’s twofold really; firstly, economic growth in the Eurozone has been stagnating. The nation was seriously flatlining toward the end of last year and many economists were willing the European Central Bank (ECB) to finally make the call and begin a period of quantitative easing (QE).
The ECB did eventually announce it would begin the sovereign bond buying process and rolled out QE in March 2015. Within weeks, the ECB was hailing the programme and claiming results are already evident; speculation that there weren’t enough bonds to buy soon died down.
So after the ECB took measures to revive Eurozone growth (and it has been improving since the QE began), Greece was still a major factor weighing on the Euro. January saw radical left-wing party Syriza voted into power in Greece with promises to save the nation from the current austerity deal it’s been crushed under.
However, talks have been lethargic to say the least and, in actual fact, it’s hard to pinpoint where progress has actually been made.
High time for #Tsipras government to compromise. Negative economic & political consequences too high if developments spiral out of control.
— Janis Emmanouilidis (@jaemmanouilidis) April 16, 2015
So much so, that Standard & Poor’s have downgraded the nation’s credit rating.
S&P stated: ‘These conditions have worsened due to the uncertainty stemming from the prolonged negotiations between the almost three-month old Greek government and its official creditors.’
Additionally, Greece asked the IMF on Thursday whether it could postpone debt repayments, but the request was denied.
Meanwhile, the US Dollar has been experiencing movement on account of speculation surrounding a US Federal Reserve interest rate hike. The US could be the first economy in the Group of Seven (G7) to experience higher interest rates since the onset of the global financial crisis back in 2008.
Euro to US Dollar (EUR/USD) Exchange Rate Forecast
Thursday and Friday are scheduled to be influential days for the US Dollar exchange rate with the release of several key pieces of data. Friday will be the most significant with US inflation stats emerging.
The core US Consumer Price Index is currently forecast to remain at 1.7% on the year in March, while the non-core measure is expected to stagnate at 0.0%.
Any deviation in inflation away from predictions is likely to see the US Dollar exchange rate experience swings.
However, the data won’t stop there, with the highly influential US University of Michigan Confidence ecostat out later in North American trading. The index is expected to record growth from 93 to 94 in April.
Furthermore, the G-20 finance ministers meeting will be taking place in Washington. The gathering could have a severe impact on the Euro to US Dollar (EUR/USD) exchange rate if it touches on the subject of Greece.
The US Dollar to Euro (USD/EUR) exchange rate is trading at 0.9389; the Euro to US Dollar (EUR/USD) exchange rate is trending in the region of 1.0655.