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Euro to US Dollar (EUR/USD) Conversion Rate Forecast to Strengthen ahead of US Manufacturing

UPDATE

The Euro to US Dollar (EUR/USD) exchange rate strengthened by around 0.4% on Friday morning.

After having declined significantly yesterday, the EUR/USD exchange rate halted losses and edged higher on Friday. The appreciation can be linked to better-than-anticipated Euro-area manufacturing, services and composite PMIs. US manufacturing data due on Friday afternoon is likely to provoke changes for the world’s most traded currency pair.

The Euro to US Dollar (EUR/USD) exchange rate is currently trending in the region of 1.1125.

Yesterday…

EUR/USD Conversion Rate Dives after Draghi Calls for Review of QE in December 

The Euro to US Dollar (EUR/USD) exchange rate dived by around -1.7% on Thursday afternoon.

Despite the fact that the European Central Bank (ECB) opted to hold the cash rate and keep the asset purchase program unchanged, the shared currency dived versus its major peers. The official statement following the decision read; ‘At today’s meeting, which was held in Malta, the Governing Council of the ECB decided that the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will remain unchanged at 0.05%, 0.30% and -0.20% respectively.’

The reason for the Euro downtrend can be linked to comments from ECB President Mario Draghi following the interest rate decision. Draghi stated that policymakers were prepared to use any tools at their disposal to stimulate inflationary growth should it become necessary. He also stated that policymakers were likely to review the current program of quantitative easing in December with a view to expanding asset purchases if needed.

The Euro to US Dollar (EUR/USD) exchange rate is currently trending in the region of 1.1155.

USD/EUR Exchange Rate Predicted to Rally despite Tepid US Data

Thanks to negative correlation, the US Dollar rallied as the shared currency dived in response to dovish comments from Mario Draghi. Domestic data produced a mixed-bag of results erring towards the negative thus far, but the prospect of steep Euro declination has seen heightened demand for the North American asset.

US Continuing Claims for the week ending October 10th came in below forecast but still rose from the previous figure of 2164k to 2170k. Similarly, Initial Jobless Claims for the week ending October 17th came in below expectations but rose slightly from the previous week’s reading. ‘The level of outright layoffs is very low,’ said Thomas Simons, a money-market economist at Jefferies LLC in New York, who projected 260,000 claims. ‘There isn’t much fat left to trim’ in the labour market. However, August’s House Price Index came in at 0.3% on the month, missing the market consensus of 0.5% growth.

The Euro to US Dollar (EUR/USD) exchange rate dropped to a low of 1.1148 during Thursday’s European session.

Euro to US Dollar (EUR/USD) Exchange Rate Forecast to Dive on Negative Correlation

Now that the ECB and Mario Draghi proved to be as dovish as markets had expected, the shared currency is likely to dive versus the US Dollar, especially given the recent EUR/USD surge. There will be several influential domestic data publications on Friday with the potential to provoke changes for the world’s most traded currency pairing, but today’s proceedings will likely overshadow results.

For those invested in the common currency, the German and Eurozone Manufacturing, Services and Composite PMIs will be of interest. In terms of US data, the Manufacturing PMI has the potential to provoke changes for the US Dollar.

The Euro to US Dollar (EUR/USD) exchange rate climbed to a high of 1.1351 during Thursday’s European session.