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Euro to US Dollar (EUR/USD) Exchange Rate Forecast to Tick Lower as Eurozone Confidence Falls

EUR/USD Conversion Rate Predicted to Tick Lower After Mixed European Data

The Euro to US Dollar (EUR/USD) exchange rate edged lower by around -0.1% on Tuesday afternoon.

Following the release of some mixed European data, the single currency softened versus nearly all of its currency rivals. The depreciation is mostly the result of concerns that China’s economic slowdown and the falling price of oil will have a long-term detrimental impact on Eurozone trade. Additionally, the Euro has been overbought and the third consecutive day of European stock depreciation is adding to headwinds.

Despite all this, European data has provided traders with a small amount of positive news. Although January’s German ZEW Economic Sentiment Survey dropped from 16.1 to 10.2 in a sharp slide in confidence, this was still a much shallower decline than the market consensus of a drop to 7.9. The German ZEW Current Situation Survey, meanwhile, eclipsed forecasts and unexpectedly rose in January. Also supportive of hopes that the European Central Bank (ECB) will not look to extend stimulus was Eurozone Consumer Prices data showing that inflation in January was unchanged from previous estimates.

The Euro to US Dollar (EUR/USD) exchange rate is currently trending in the region of 1.0872.

USD/EUR Conversion Rate Predicted to Edge Higher despite Heightened Risk Appetite

Although China’s Gross Domestic Product for the fourth-quarter weakened to the lowest rate of growth since 2009, the prospect of additional stimulus from the People’s Bank of China (PBoC) has caused trader risk-appetite to strengthen. ‘There’s a possibility of a cut in banks’ reserve-requirement ratios,’ said Shen Zhengyang, a Shanghai-based analyst at Northeast Securities. ‘Railway and infrastructure companies are the main fulcrum for China to stabilize economic growth.’

Also supporting demand for high-yielding assets is rising Chinese stock values which saw the Shanghai Composite Index end the Asian session over 3.2% higher. As a safe-haven asset, the US Dollar cooled versus a number of its most traded currency peers. ‘The stock market jumped partly because of speculation China will introduce incentives such as interest-rate cuts or RRR cuts soon after it released GDP data this morning,’ said Zhang Gang, analyst at Central China Securities in Shanghai.

The Euro to US Dollar (EUR/USD) exchange rate dropped to a low of 1.0900 during Tuesday’s European session.

Euro to US Dollar (EUR/USD) Exchange Rate Forecast: US Consumer Prices in Focus

Later during Tuesday’s European session there is the potential for changes to the Euro to US Dollar (EUR/USD) exchange rate with the publication of US NAHB Housing Market Index and Net Long –Term TIC Flows data due for publication. However, there is also the chance that this data won’t be particularly impactful with investor risk-appetite dominating market trade.

Wednesday is very likely to see significant EUR/USD exchange rate volatility with US inflation data at the forefront of trader focus. An absence of significant European data will see the single currency move in line with US Dollar positioning and changes in market sentiment.

The Euro to US Dollar (EUR/USD) exchange rate climbed to a high of 1.0910 during Tuesday’s European session.