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Euro to US Dollar Exchange Rate Forecast to Fall if Yellen shows Tapering Support

ECB, Euro, banking, EU

Monday’s better-than-forecast business confidence report for Germany was followed today by some surprisingly strong consumer confidence figures for the Eurozone’s largest economy.

The Euro struggled to gain ground against Sterling but did advance on the US Dollar in the aftermath of the data release.

However, the EUR/USD pairing trimmed its advance during the North American session as economists speculated that Fed Chairman Janet Yellen would stick to her stimulus-tapering guns tomorrow.

Yellen is due to address the senate on the subject of monetary policy, and although US data has been a little weak of late, the majority of industry experts believe that the Fed will continue reducing easing at a slow but steady pace.

According to one Washington-based market analyst; ‘Any data or any Fed speakers going forward that reiterate the Fed’s tapering is Dollar-positive. Investors are really concerned about how weak economic data may influence the outlook for monetary policies’.

The US Dollar extended gains as a report showed an unexpected surge in US home sales in January.

Sales leapt by 9.6 per cent last month following a positively revised decline of 3.8 per cent.

Economists had forecast a month-on-month decline of 3.4 per cent.

The number of new home sales increased by 468,000 in January, achieving a five-year high, following a gain of 427,000 in December.

Separate data showed that MBA mortgage applications plummeted by 8.5 per cent in the week ending February 21st.

We forecast that even if tomorrow’s European data is upbeat, EUR/USD gains will be tempered by Yellen’s speech. However, if Yellen hints that the pace of tapering easing may be slowed or stopped the Euro could advance.

While Yellen’s speech could be a major cause of ‘Greenback’ volatility tomorrow, investors will also be focusing on US durable goods orders, initial jobless claims and continuing claims figures.

German unemployment/inflation data and Eurozone confidence indexes may also be responsible for driving EUR/USD movement.

Euro (EUR) Exchange Rates

[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate , 
Euro,,US Dollar,1.3673,
Euro,,British Pound,0.8218,
Euro,,Australian Dollar,1.5243,
Euro,,New Zealand Dollar,1.6467,
Euro,,Canadian Dollar,1.5104,

As of 16:20 GMT