The Euro to US Dollar (EUR/USD) exchange rate is trending within a tight range on Tuesday morning.
Speculation as to whether the European Central Bank will resort to full-scale quantitative easing has seen the shared currency slump versus its major peers. Although the declination has been somewhat priced-in, a disappointing result from the German Wholesale Price Index caused the decline to extend.
The US Dollar, meanwhile, is holding steady versus most of its major peers after a delay to rate revisions seems inevitable following disappointing labour market data.
The Euro to US Dollar (EUR/USD) exchange rate is trending in the region of 1.1822.
With the policy outlook of the Federal Reserve and the European Central Bank (ECB) diverging wildly, the Euro edged lower versus its US counterpart.
Some economists are speculating that the Fed’s tightening of policy and the ECB’s plans to loosen policy further could see the Euro to US Dollar (EUR/USD) exchange rate approach parity in 2015.
It is fair to say, however, that the US Dollar’s advance slowed considerably in the aftermath of domestic data which outlined concerns in the US labour market. This, in turn, caused futures traders to delay bets as to the timing of a Fed rate revision.
The Euro to US Dollar (EUR/USD) exchange rate is currently trending in the region of 1.1830.
Euro (EUR) Exchange Rate Softens on QE Bets
With speculation rife that the ECB will be forced into introducing quantitative easing in order to combat deflation and recession in the Eurozone, the shared currency dived against its major peers. Although many German economists have opposed the bond-buying scheme, the majority are in favour.
‘The matadors will position themselves again this week,’ said Holger Sandte, chief European analyst at Nordea Bank AB in Copenhagen. ‘Draghi will have enough of a majority. Maybe they won’t commit to the amounts the doves would like to see, but then again they can always add on.’
‘We’ve got a large contrast between the ECB and the Fed, the Eurozone economy will struggle at least in the first half of this year, inflation is going to go even lower as the oil-price effect comes through,’ said strategist Peter Dragicevich. ‘There’s limited upside in the Euro and it should continue to drift lower as the year progresses.’
The Euro to US Dollar (EUR/USD) exchange rate dropped to a low of 1.1786 today.
US Dollar (USD) Exchange Rate Slows Advance on Labour Data
Although the US Dollar is holding a position of strength against the majority of its most traded currency rivals, recent labour market data forced futures traders to pare bets as to the timing of a rate revision.
‘Wage inflation is continuing to hold the Fed’s hand back,’ said expert Thomas di Galoma. ‘You’re seeing a repositioning on the yield curve, mainly investors selling the longer end to buy the front-end.’
Euro to US Dollar (EUR/USD) Exchange Rate Forecast to Trend Lower
With policy divergence such a key factor in the direction taken by the currency pairing, the Euro to US Dollar (EUR/USD) exchange rate is likely to continue trending lower on Monday.
The Euro to US Dollar (EUR/USD) exchange rate reached a high today of 1.1871.