Euro to US Dollar Exchange Rate Sees Solid Gains despite Mixed Eurozone Data
Despite a lack of particularly impressive Eurozone data this week, the Euro to US Dollar (EUR/USD) exchange rate has spent most of the week climbing on a combination of Eurozone economic hopes and a more cautious Federal Reserve.
After a volatile week and modest gain last week, this week’s EUR/USD movement has been more solid. EUR/USD opened this week at the level of 1.1230 and has gained around half a cent.
This morning, EUR/USD briefly touched on a two week high of 1.1291, before trending closer to the level of 1.1285 at the time of writing.
Unless there is some particularly disappointing Eurozone data or impressive US data before the end of the week, the pair is likely to sustain some solid gains.
The Euro (EUR) has been able to register solid gains thanks to signs of recovery in the Eurozone economy, as well as a high level business deal between a couple of Japanese and German banks.
Euro (EUR) Exchange Rates Benefit from Cross-Border Banking Deal
Mixed Eurozone data this week has done little to dissuade investors from buying the Euro versus an unappealing US Dollar (USD), and towards the end of the week investors found another week to buy the shared currency.
News that Japanese Mitsubishi Financial Group was planning to purchase an aviation financing business belonging to DZ Bank in Germany left investors feeling more optimistic about the Eurozone’s economy at the end of the week.
According to Masafumi Yamamoto, Chief Forex Strategist at Mizuho Securities, the Euro was likely to hold onto most of this week’s gains:
‘It is not really a surprise that the Euro is capable of reacting quickly to potentially positive factors, given the fundamentals surrounding the Eurozone economy are showing signs of improvement.’
This made it easier for the Euro to hold versus its biggest rival, the US Dollar, which has been weighed by mixed US data and a cautious stance from the Federal Reserve.
US Dollar (USD) Exchange Rates Unappealing as US PPI Data Fails to Impress
The US Dollar has been sold from its highs this week, after investors digested last week’s strong US Non-Farm Payroll results and began to doubt that it was enough to make the Federal Reserve more likely to take a hawkish stance on monetary policy.
Doubts of the Fed taking a hawkish stance again any time soon dampened further on Wednesday, when the latest US inflation rate data was underwhelming and the Federal Reserve reiterated its cautious tone.
The Fed surprised investors with a shift away from hawkish to a more cautious stance in its most recent decision, and the meeting minutes report on Wednesday went into more detail on the Fed’s shift.
The bank indicated that it would leave the door open for the possibility of US interest rate hikes if US data was impressive enough.
However, the bank also noted that amid slowing global growth and signs of uncertainty in the US economy it was currently not planning further rate hikes this year.
These stats made investors continue to sell the US Dollar from its recent highs, making it easier for the Euro to gain.
Yesterday’s US PPI results beat expectations and gave the US currency a slight boost, but it was not enough to lead to a strong rebound.
Euro to US Dollar (EUR/USD) Exchange Rate Investors Await Major Data Next Week
While this week’s Central Bank news was influential, Euro to US Dollar (EUR/USD) exchange rate investors are likely to shift focus back towards data as next week will see a slew of typically influential Eurozone and US ecostats published.
The European Central Bank (ECB) and Federal Reserve have both taken fairly ‘wait and see’ stances in regards to monetary policy, meaning that upcoming data is most likely to influence Central Bank and currency outlooks.
Tuesday will see the publication of some relatively noteworthy prints, including ZEW’s German and Eurozone economic sentiment stats, as well as manufacturing and industrial production data from the US.
Even more influential data will be published in the second half of the week though, including Eurozone inflation, US trade data, Eurozone PMI projections and US retail sales stats.
As the US Dollar selloff is likely to cool, any news that influences safe haven currencies like the US Dollar could also influence Euro to US Dollar (EUR/USD) exchange rate movement next week.