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Euro to US Dollar (EUR/USD) Exchange Rate Forecast: Pairing Bearish after Fed Encourages Bets on 2015 Interest Rate Hike

The ‘Buck’ (USD) is on a bullish run this morning after Federal Open Market Committee (FOMC) Chair Janet Yellen made hawkish remarks on the probability of a 2015 interest rate hike, with the EUR/USD pairing shedding value as a result.

Improved IFO Business Expectations Survey Shored up the Single Currency (EUR) to Push EUR/USD Conversion Rate to Multi-Day Best

While German Consumer Confidence was revealed to have slumped further than expected this month, falling to 9.6 rather than 9.8, this did not particularly weigh on the single currency (EUR) yesterday. In no small part this was due to the IFO Business Climate and Expectations surveys rising contrary to forecasts, with the latter climbing significantly to 103.3 to indicate that the domestic economic mood has begun to improve. Although these readings did undeniably give the Euro a boost, keeping the EUR/USD exchange rate on a strong uptrend through the morning, it seems likely that business sentiment within the currency union will turn rather less positive as the Volkswagen scandal drags out.

In spite of the US Durable Goods Orders for August contracting on Thursday the result was considered to be somewhat hawkish as it proved better than traders had anticipated, printing at just -2.0 instead of -2.3%. As domestic Continuing Jobless Claims were shown to have decreased at a slower pace than hoped, however, the ‘Greenback’ (USD) was initially unable to produce a rally on mixed investor sentiment. Consequently the EUR/USD currency pair struck a multi-day high of 1.1293, before beginning to retreat.

Hawkish Commentary from Federal Open Market Committee (FOMC) Chair Boosts ‘Greenback’ (USD) Further Today, Euro (EUR) Lacking Support from Fresh Data

With month-on-month US New Home Sales for August posting an unexpected rise to 5.7% the case for an imminent interest rate hike from the Fed appeared to be bolstered yesterday, particularly after a speech from Federal Open Market Committee (FOMC) Chair Janet Yellen further encouraged hopes. In contrast to the dovish tone which had accompanied the September Rate Decision, Yellen iterated that she expects interest rates to be raised before the end of 2015, suggesting that the current global slowdown will not remain enough of a deterrent to dissuade US policymakers from beginning the cycle of monetary tightening in the coming months. This decidedly hawkish signal led to a more decided slump in the EUR/USD pairing, dipping a daily low of 1.1114.

EUR/USD Exchange Rate Forecast: Fed Interest Rate Rise Speculation to Continue Driving Movement

No further data releases are due from the Eurozone ahead of the weekend, with the EUR/USD conversion rate to be driven primarily by upcoming US figures. Both the University of Michigan Confidence index and domestic Services PMI could inspire the ‘Buck’ to strengthen further, with forecasts predicting improved readings. Additional support for a near-future Fed rate hike should see the ‘Greenback’ continuing to make gains, with any shortfalls sure to be of benefit to the EUR/USD pairing.

Current EUR, USD Exchange Rates

At time of writing, the Euro to US Dollar (EUR/USD) exchange rate remains on a strong downtrend in the range of 1.1136, with the US Dollar to Euro (USD/EUR) currency pair gaining ground around 0.8975.