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Euro to US Dollar Exchange Rate Edges Higher Following European Central Bank (ECB) Decision

Euro to US Dollar Exchange Rate Edges Away from Weekly Lows on ECB President’s Optimism

Cautious optimism from European Central Bank (ECB) President Mario Draghi helped the Euro to US Dollar (EUR/USD) exchange rate to recover from weekly lows on Thursday.

However, Draghi’s tone was still cautious enough to prevent any market bullishness in the Euro.

EUR/USD only trended around 1.2200 at the time of writing, not far above the week’s low of 1.2158.

While Draghi noted that Eurozone growth was expected to remain solid and broad despite recent slowdown, his comments didn’t make markets more optimistic that the bank would hike Eurozone interest rates any time soon.

He also repeated a familiar line about the current necessity of monetary stimulus rather than explicitly mentioning when exactly the stimulus would be unwound.

Euro to US Dollar Exchange Rate Trends near Lows as Investors Anticipate ECB

Investor caution ahead of April’s European Central Bank (ECB) policy decision has kept the Euro to US Dollar (EUR/USD) exchange rate pressured, and further losses could be ahead.

So far this week, EUR/USD has tumbled from the week’s opening level of $1.2288 to near a three-month-low of $1.2160. EUR/USD is on track to see the biggest week of losses in over a month.

The ECB is expected to take a cautious stance in its April policy decision, and maintain a viewpoint consistent with bets that the bank will not hike Eurozone interest rates until the second half of 2019.

Investors generally hope the bank will offer its thoughts on recent Eurozone data, which has fallen below forecasts and indicated that 2017’s strong pace of growth will not continue.

Essentially, the reaction the bank has to Eurozone data and the bloc’s current growth trajectory is likely to inspire the Euro (EUR) outlook.

Euro (EUR) Exchange Rates Hold Ground as Eurozone Outlook Remains Firm

The Euro continues to be supported by a firmer economic outlook, despite some ECB uncertainty. The bank is unlikely to really undermine Euro support unless it comes out with something shocking.

This is because, while an ECB interest rate hike looks far away, the bank is still on track to unwind its aggressive quantitative easing (QE) programme this year and economic fundamentals generally continue to improve.

For example, while recent Eurozone business confidence figures have been lower than expected, they have still printed at typically strong levels.

Eurozone consumer confidence remains quite strong too. Most of this week’s Eurozone consumer confidence figures have beaten expectations, with Italian consumer confidence coming in at 117.1 in April and France’s result unexpectedly rising to 101.

That said, on Thursday morning, GfK’s German consumer confidence report for May slipped from 10.9 to 10.8 as forecast.

US Dollar (USD) Exchange Rates Supported by Hopes of Strengthening US Economy

The US Dollar (USD) has been enjoying a bullish rebound from its lows in recent weeks, as all the upside risks in the US economy finally begin to take effect on the currency.

Following months of uncertainties on US politics and trade rhetoric, those factors have taken a backseat this week and investors are now focusing on the positives.

The US economic outlook is solid, with the Federal Reserve increasingly expected to hike interest rates three more times in 2018 rather than just twice.

On top of this, US 10-year Treasury bond yields reached 3% this week for the first time since January 2014, in further signs that the US economy and inflationary pressures are improving.

Rising hopes that the US could work out its trade issues though negotiations rather than via trade tariffs have also helped the US Dollar remain appealing.

Euro to US Dollar (EUR/USD) Forecast: Major Ecostats Due on Friday

Friday will see the publication of most of this week’s major ecostats, from both the Eurozone and the US.

As a result, if the European Central Bank (ECB) decision ultimately has little impact on Euro trade, the Euro to US Dollar (EUR/USD) exchange rate could still see a shift in movement before markets close for the week.

Key Q1 2018 Gross Domestic Product (GDP) projections from France, Spain and the US will be published throughout the day.

April Consumer Price Index (CPI) projections for France and Spain will also be published.

Lastly, some influential confidence results will be published too. Eurozone consumer and business confidence stats from April will come in, as will Michigan University’s final April US consumer sentiment survey results.

Overall, while the Euro to US Dollar (EUR/USD) exchange rate has seen big losses this week so far, a surprise drop in key US data or stronger Eurozone data could help the pair recover slightly.