The Euro to US Dollar (EUR/USD) exchange rate dived by around -1.66% on Thursday morning.
After the Federal Open Market Committee left the cash rate unchanged, the US Dollar strengthened versus all of its major peers. The appreciation is as a result of the post-decision press conference in which Fed Chair Janet Yellen dropped tired rhetoric like ‘patience’ with regard to rate revisiosn.
The Euro, meanwhile, softened after the recent surge was seen as unjustified. The European Central Bank (ECB) will be pleased to see the shared currency weaken given that quantitative easing is designed for that purpose.
The Euro to US Dollar (EUIR/USD) exchange rate is currently trending in the region of 1.0664.
Yesterday…
The Euro to US Dollar (EUR/USD) exchange rate advanced by around 0.12% on Wednesday afternoon.
With the launch of quantitative easing in the Eurozone being generally well received by traders, the Euro strengthened versus many of its major peers. Additional appreciation can be attributed to positive results from Eurozone construction data.
The US Dollar, meanwhile, is generally trending statically as traders await the monetary policy decision from the Federal Open Market Committee (FOMC). Domestic data printed disappointingly thus far, but it has had minimal impact.
The Euro to US Dollar (EUR/USD) exchange rate is currently trending in the region of 1.0607.
Euro (EUR) Exchange Rate Strengthens on Positive Sentiment towards QE
In the aftermath of the launch of quantitative easing in the Eurozone, the shared currency has seen heightened demand. The Euro strength has come even as Greece continues to fight against austerity, which may be of concern to the European Central Bank (ECB). Given that QE is designed to devalue a currency, the Euro’s resilience could spell disaster.
‘It is pretty clear that the programme has been put into place as soon as possible, before all the operational details had been settled,’ said Peter Chatwell, a strategist at Mizuho. ‘This uncertainty means our funding markets are not operating as normal.’
The Euro to US Dollar (EUR/USD) exchange rate has fallen to a low of 1.0577 today.
US Dollar (USD) Exchange Rate Holds Steady ahead of Policy Decision
With divided opinions as to how the FOMC will approach their policy outlook, the US Dollar is generally holding steady versus most of its major peers. Whilst many believe that the Federal Reserve will drop tired rhetoric such as ‘patience’, there are some who believe that they will purposefully retain dovish language so as to avoid a US Dollar surge and risk damaging recent growth.
‘So far Yellen has kind of downplayed things like the impact of the stronger Dollar, or the disinflationary trends in some of the larger economies and some of the disruptions that we could see from them,’ said New Jersey-based economist Terry Sheehan. ‘The trade data is already showing some signs of slowing in exports, so I would really like to know just how confident she is regarding the risks to the outlook.’
‘We expect the Committee to drop ‘patient’ from its ‘forward guidance’ and suggest that the timing and pace of hikes will depend on incoming macro information, but be gradual initially,’ stated Goldman Sachs.
Euro to US Dollar (EUR/USD) Exchange Rate Forecast to Fluctuate
The FOMC decision is likely to have a big impact on markets, and so the Euro to US Dollar (EUR) exchange rate is likely to fluctuate over the course of Wednesday’s trade. Thursday ought to see heightened EUR/USD volatility with the ECB’s economic bulletin and US labour market data due for publication.
The Euro to US Dollar (EUR/USD) exchange rate has reached a high of 1.0636 today.
