Euro to US Dollar (EUR/USD) Exchange Rate Trending Higher
Although the Eurozone published a mixed bag of manufacturing PMI reports on Monday, the Euro to US Dollar (EUR/USD) exchange rate gained by around 0.4%.
The common currency was supported by bets that Greece will remain in the Eurozone while the US Dollar was coming under a little pressure following last week’s disappointing US fourth quarter growth report.
The Euro held gains after the US ISM Manufacturing report fell short of forecasts.
The Euro to US Dollar (EUR/USD) exchange rate is currently trending in the region of 1.1332
The Euro to US Dollar (EUR/USD) exchange rate could drop next week if the US Non-Farm Payrolls report shows sturdy jobs growth.
EUR/USD Exchange Rate Softer Despite US GDP Dip
The Euro prepared to close out the week in a slightly softer position against the US Dollar in spite of fourth quarter growth figures for the US coming in below expected levels.
As the annual 5.0% growth surge recorded in quarter three was surprisingly strong, economists had forecast a moderation in the final three months of 2014.
However, rather than slowing to 3.0% (as projected) growth eased to 2.6%.
The US Dollar remained trending higher against the Euro as the 4.3% surge in personal consumption (which beat the 4.0% forecast) indicated that consumers will continue to drive growth in the first quarter of 2015.
According to Reuters; ‘The slowdown, which follows two back-to-back quarters of very strong growth, is likely to be short-lived given the enormous tailwind from lower gasoline prices. Most economists believe fundamentals in the United States are strong enough to cushion the blow on growth from weakening overseas economies.’
The US economy also continues to outperform those of most other developed nations.
That being said, Former Treasury Secretary Lawrence Summers recently asserted that the US still needs to introduce economy-boosting measures and tackle deflation concerns.
He commented; ‘We are still in a situation where the risks are more to the downside than they are to the upside, still in a situation where low-flation or deflation is a greater risk than excessive inflation, still in a situation where we need to be focused on growing the economy faster in the United States.’
The Euro to US Dollar (EUR/USD) exchange rate spent the week trading between highs of 1.14 and lows of 1.12 US Dollars.
The common currency could return to trending around the eleven-year low struck on the back of Syriza’s election victory in the week ahead if US employment figures impress.
Euro to US Dollar (EUR/USD) Exchange Rate Forecast: 11-Year Low Ahead?
Although the Eurozone’s economic reports (from final PMI figures to retail sales data) will have an impact on the direction taken by the Euro over the course of the week, investors with an interest in the Euro to US Dollar (EUR/USD) currency pair will be focusing on the US Non-Farm Payrolls report.
The highly-influential jobs data is scheduled for release on Friday.
As the Federal Reserve has drawn a clear connection between the increasing of borrowing costs and the performance of the US labour market, an impressive jobs gain would up the odds of a rate hike being introduced in the first half of 2015. The US Dollar would be boosted as a by-product and the EUR/USD pairing may even touch fresh lows.
The US unemployment rate came in at 5.6% in December following a jobs gain of 252,000.
The last month’s employment figures prompted this response from Jeffrey Sparshott and Josh Mitchell; ‘If the economy continues to create jobs at a strong pace, wages could start to rise faster and more people could come off the sidelines. Labor force participation are stuck near levels last seen in the late 1970s. The participation rate was 62.7% in December, down two-tenths of a percentage point from November. A broader version of the unemployment rate, which includes involuntary part-time workers and people marginally attached to the labor force, was 11.2% last month, down from 11.4% in November.’
An employment increase of 233,000 is expected this time out, which would leave the jobless rate unchanged.
It would take a Non-Farm Payrolls print of 250,000+ to cause material movement in the EUR/USD currency pair.
Any developments in Syriza’s renegotiation of the Greek bailout will also be of interest.
The Euro to Pound Sterling (EUR/GBP) exchange rate closed out the week trading in the region of 0.7520
The Pound Sterling to Euro (GBP/EUR) exchange rate was trading in the region of 1.3296
The Euro to US Dollar (EUR/USD) exchange rate was trading in the region of 1.1317
The US Dollar to Euro (USD/EUR) exchange rate was trading in the region of 0.8834