The Euro to US Dollar (EUR/USD) exchange rate cooled by around -0.31% on Thursday morning.
Whilst most analysts don’t expect the European Central bank to make any dramatic policy changes in the forthcoming interest rate decision, the following press conference is likely to be of significance. Many expect President Mario Draghi to give the timing of the launch of quantitative easing. The Euro’s depreciation is a result of some concern that the ECB will fail to source the requisite bonds to fund the operation.
The US Dollar, meanwhile, strengthened versus many of its major peers thanks to continued support following Wednesday’s positive data. With labour market data forecast to print positively, rate hawks will be hoping the recent run of positive data results will pressurise the Federal Open Market Committee into hiking rates.
The Euro to US Dollar (EUR/USD) exchange rate is currently trending in the region of 1.1047.
The Euro to US Dollar (EUR/USD) exchange rate dived by around -1.04% on Wednesday afternoon.
Mixed European data had a minimal impact on the shared currency on Wednesday thanks to ongoing speculation that the European Central Bank (ECB) quantitative easing program, due for launch very soon, will not be properly financed due to a shortage of bonds.
The US Dollar, meanwhile, strengthened versus most of its major peers thanks to positive domestic data. With the Federal Reserve stating that rate revisions would be subject to data, the positive results will pacify rate hawks.
The Euro to US Dollar (EUR/USD) exchange rate is currently trending in the region of 1.1066.
Euro (EUR) Exchange Rate Plummets as ECB Readies QE
As mentioned above, the main reason that the shared currency softened is due to speculation that the ECB will struggle to source enough bonds to add €1 trillion into the Eurozone. ‘It will be challenging for the ECB to source enough government bonds to meet its QE targets,’ said Anthony O’Brien, co-head of European rates strategy at Morgan Stanley.
‘There is already a huge shortage of German bonds in the market,’ said Philipp de Cassan, head of Euro core rates trading at Nomura. ‘We’re already seeing the symptoms of an ECB buying program.’
Peter Praet, the ECB’s chief economist, responded; ‘We hear that pension funds and insurers don’t want to sell…But banks will probably rise to the bait. Institutions outside the Eurozone also have large holdings of government bonds. They can sell too.’
The Euro to US Dollar (EUR/USD) exchange rate dropped to a low today of 1.1063.
US Dollar (USD) Exchange Rate Advances on Positive Data
US data printed positively on Wednesday, which saw the US Dollar strengthen versus the majority of its most traded currency rivals. Of particular significance was the ISM Non-Manufacturing Composite which bettered the median market forecast of a drop from 56.7 to 56.5, with the actual result reaching 56.9.
The ISM report stated; ‘According to the NMI(R), 14 non-manufacturing industries reported growth in February. Comments from respondents have increased in regards to the affects of the reduction in fuel costs and the impact of the West Coast port labour issues on the continuity of supply. Overall, supply managers feel mostly positive about the direction of the economy.’
Euro to US Dollar (EUR/USD) Exchange Rate Forecast to Hold Losses
Although the Federal Reserve Beige Book is due for publication later on Wednesday, the Euro to US Dollar (EUR/USD) exchange rate is likely to hold losses with mounting negative sentiment towards the ECB.
EUR/USD fluctuations will be likely on Thursday with several data publications pertaining to both Europe and the US due.
The Euro to US Dollar (EUR/USD) exchange rate advanced to a high today of 1.1187.