The Euro to US Dollar (EUR/USD) exchange rate has continued the steady decline that began after the European Central Bank’s (ECB) announcements last week, though the Euro may not have dropped by as much as the central bank had hoped for.
European Central Bank (ECB) Announcements Seem Unlikely to Inspire Considerable Euro (EUR) Downtrend
Despite European Central Bank President Mario Draghi’s best efforts, it seems as though the Euro has not experienced the inspired weakness that the central bank was hoping for. The Euro is still able to hold its own against the strengthening US Dollar, with EUR/USD currently trending in a steady range of 1.1110, slightly up from this morning’s levels of 1.1097.
Strong US data does not seem to have offset confusion over the matter as investors remain drawn to the shared currency regardless of the ECB’s desire to weaken it. Positive Eurozone Industrial production data released yesterday may also have added to the Euro’s current strength.
Investors were not dissuaded from the Euro despite comments on the ECB’s blog by Vice President Vitor Constancio that further easing measures may still be possible if the Euro did not fall satisfactorily.
Positive US data puts the ‘Greenback’ in a stronger position than the uncertain Euro regardless. Retail sales data released earlier today came out higher than forecast and January’s business inventories edged up to 0.1% from 0.0%.
Oil Crisis: Lowered Risk-Sentiment Increases Appeal of US Dollar (USD) and Euro (EUR)
The year’s oil crisis seems unlikely to end any time in the near future after Iran’s Oil Minister Bijan Zanganeh announced Iran’s intention to increase oil output to 4 million barrels a day. Other major oil producers have also refused to decrease oil production unless all other major producers agree to ‘freeze’.
This caused oil prices to fall once more and continues to cause issues in oil bloc nations – whose risky currencies rely on high oil prices for their strength.
As high-risk commodity currencies become less appealing to investors, lower-risk currencies like the Euro and the ‘safe-haven’ US Dollar garner more investor attention.
Euro to US Dollar (EUR/USD) Exchange Rate Forecast: Federal Open Market Committee (FOMC) Interest Rate Decision to Inspire Movement
The main source of movement in the EUR/USD pair this week is certain to be all the key data releases coming from the US region tomorrow; most importantly the Fed’s interest rate decision. While this is expected to remain at the 0.50% rate set in December, it is likely the central bank will offer some idea of how healthy growth has been and how soon the next rate-hike could be expected.
This announcement follows up plenty of important US data to be released throughout the day tomorrow, including the latest CPI figures for February, as well as new releases for building permits, average weekly earnings, industrial production and crude oil inventories.
Many analysts expect the Fed to remain optimistic on further interest rate hikes happening throughout 2016. Suffice to say, it is likely that tomorrow will be a very influential day for the ‘Buck’, as further positive data is likely to result in bullish movement from the US Dollar and potentially weaken the Euro in turn.
On the other hand, the only major Eurozone data release on the cards this week is CPI data for February, far less likely to influence movement than all the North American events happening before the week’s end. However, it is still possible that poor CPI data from the Eurozone could further weaken the Euro, allowing it to be more easily pushed down by a bullish Dollar.
It is also possible that various ECB execs will make further comments on the stimulus provided last week and attempt to steer the Euro in a weaker direction.
The Euro to US Dollar (EUR/USD) exchange rate is currently trending in the region of 1.1110 while the US Dollar to Euro (USD/EUR) exchange rate trends in the region of 0.8998.