The Euro to US Dollar exchange rate has fallen sharply on the afternoon of 12th April, with a -0.5% EUR/USD drop being reported.
This slump in the Euro’s value follows a pair of economic events that have shattered confidence in the single currency.
The first has been the release of Federal Reserve minutes which suggest that another US interest rate hike could be imminent.
Even worse, it has also been revealed that European Central Bank (ECB) policymakers have no intention of making monetary policy adjustments for now.
These binary contrasts between the outlooks of the US and European central banks have made a ‘perfect storm’ and battered the Euro today.
(First published 11th April, 2018)
Minor Positive for Italian Sales Data Keeps EUR/USD Exchange Rate Positive
The Euro to US Dollar exchange rate (EUR/USD) has seen a minimal rise today, but is still trading near the best level of the week so far.
This advance to a rate of $1.2369 follows the news that Italian retail sales levels have improved in February, both on the month and the year.
The sales readings showed a month-on-month rise from -0.5% to 0.4%, while a year-on-year shift from -0.8% to -0.6% was also recorded.
Russian Warning against US Action in Syria Leaves US Dollar to Euro (USD/EUR) Exchange Rate Static
The US Dollar (USD) continues to be negatively affected by the latest Syrian chemical weapons incident, with Russia weighing in with a concerning warning.
Following US officials declaring that they were considering another military intervention in the region, Russia’s Permeanant Representative to the UN has spoken.
Vasily Nebenzya has responded directly to the hinted US plans, stating;
‘I would once again beseech you to refrain from the plans that you’re currently developing’.
The risk of a war between the US (and potential allies) and a Russia-backed Syria has therefore been increased, which has lowered confidence in the US Dollar.
Euro to US Dollar Exchange Rate Forecast: Will Draghi Comments Trigger EUR/USD Advance?
Additional Euro to US Dollar (EUR/USD) exchange rate movement is likely on upcoming speeches from European Central Bank (ECB) officials.
ECB President Mario Draghi will give remarks at noon today, while fellow policymaker Benoit Coeure is due to speak on the afternoon of 12th April.
There will also be a speech later on Thursday from Bundesbank President Jens Weidmann.
If all three central bank officials see room for tighter monetary policy then the Euro could rise, making the EUR/USD exchange rate more favourable.
Outside of these speeches, the Euro could also appreciate if Thursday’s Eurozone industrial production readings show as-expected growth in February.
Further data that could end the Euro’s week on a high note will be German inflation rate stats and a Eurozone trade balance reading out on 13th April.
The finalised German inflation figure for March is expected to rise, while the currency bloc’s trade balance reading is tipped to swell from €3.3bn to €20.2bn.
This glut of Eurozone data could be countered by equally supportive US ecostats over the week, however, so the EUR/USD exchange rate may remain volatile.
Today will see the release of US inflation rate stats for March, along with the Federal Reserve’s minutes for their March policy meeting.
Inflation levels are tipped to rise, while further support could come from the minutes showing hawkishness among Fed policymakers.
The Fed last raised US interest rates from 1.50% to 1.75% in March, but traders are still expecting at least one if not three more hikes before the end of 2018.
If US inflation levels rise over the 2% mark then the odds of a near-term interest rate hike increase, as the Fed is forced to act by trying to reduce price growth.