The Euro to US Dollar (EUR/USD) exchange rate dived by around -1.59% on Friday afternoon.
With many traders feeling that the European Central Bank (ECB) has been too vague and opaque with regards to its monetary policy outlook and the extent of the quantitative easing program due to launch on Monday of next week, the shared currency softened despite positive data out of the currency bloc’s most influential economy.
The US Dollar, meanwhile, edged higher versus most of its major peers as analysts forecast positive Non-Farm Payrolls data. However, there is a high possibility that US economic data will be delayed after bad weather hindered the opening of government agencies.
The Euro to US Dollar (EUR/USD) exchange rate is currently trending in the region of 1.0855.
Euro (EUR) Exchange Rate Softens on Vague ECB
German economic data printed positively on Friday, but the data had minimal impact as opinions as to whether the extensive program of quantitative easing will be beneficial or detrimental remain divided. Non-seasonally adjusted German Industrial Production rose by 0.9% on the year, well above the median market forecast declination of -0.2%.
‘The lower oil price lifts purchasing power not only in Germany but also abroad; hence, it is good news for internal demand and German exports alike,’ said Andreas Rees, an economist with UniCredit SpA in Frankfurt. ‘The weaker Euro exchange rate provides further tailwinds for export-dependent companies.’
The significant Euro declination is a result of the ECB press conference on Thursday, in which President Mario Draghi stated that QE would continue until inflation moves closer to the target set. Opinions are divided as to whether the massive injection of liquidity will be an effective solution to the mounting issues in the Eurozone.
‘Putting it mildly, there isn’t a lot of confidence in the Euro system at the moment,’ said Alex Edwards, head of the corporate desk at UK Forex. ‘Breaking through $1.10 will likely mean a new range is soon carved out in Euro versus Dollar. Given the market’s current reaction to Draghi’s comments, it might not be long before we see parity with the Dollar.’
The Euro to US Dollar (EUR/USD) exchange rate has fallen to a low of 1.0954.
US Dollar (USD) Exchange Rate Strengthens ahead of Delayed Data
As mentioned above, unexpectedly bad weather may cause delays to US economic data. ‘Besides the monthly employment and earnings report from the Bureau of Labour Statistics, the Bureau of Commerce is scheduled to release the trade balance for January Friday at 8:30am EST. The two-hour delayed opening means the lockups normally held to give access to the press ahead of the releases are cancelled,’ stated Craig Torres writing for Bloomberg.
The US Dollar appreciation is as a result of US data being forecast to improve. Change in Non-Farm Payrolls is forecast to show a positive addition of 235,000 new jobs. In addition, The Unemployment Rate is expected to drop from 5.7% to 5.6%. Positive labour market data will see the US Dollar surge after the Federal Reserve stated that labour data would drive rate revisions.
Euro to US Dollar (EUR/USD) Exchange Rate Forecast to Decline
Providing US data prints positively, the Euro to US Dollar (EUR/USD) exchange rate is likely to hold losses for the remainder of Friday’s trade. US Dollar volatility is likely, however, with several influential data publications due later on Friday afternoon.
The Euro to US Dollar (EUR/USD) exchange rate has climbed to a high today of 1.1032.