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Euro to US Dollar Exchange Rate Falls from Three-Year-Highs as Markets Await Key Data

Last Week’s Three-Year-High in Euro to US Dollar Exchange Rate was Short-Lived

Investors bought a cheap US Dollar (USD) back from its lows on Friday, pushing the Euro to US Dollar (EUR/USD) exchange rate down from its best levels in over three years.

Despite a brief US Dollar recovery rally earlier in the month, EUR/USD once again surged last week, recovering most of its losses and even briefly touching on a high of 1.2552 on Friday. This was the pair’s best level since November 2014.

Throughout the week overall though, EUR/USD climbed from 1.2252 to 1.2412. The pair continued to trend near the week’s opening levels on Monday morning amid a lack of reasons to move on either currency.

The US Dollar was bought from its worst levels but lacks the drive to continue pushing EUR/USD lower. Investors are likely to wait for this week’s most influential ecostats before making any major moves on EUR/USD.

Euro (EUR) Exchange Rates Fails to Hold Best Levels as Eurozone Outlook Unchanged

Last week’s Eurozone data was solid, but not so strong that it made investors particularly more confident about the Eurozone economic outlook.

Demand for the Euro (EUR) has been strong in recent months as investors expect strong growth from the Eurozone in 2018.

However, Eurozone inflation data continues to be relatively steady and European Central Bank (ECB) interest rate hike bets have mostly remained subdued as a result.

Last week saw the publication of Q4 Gross Domestic Product (GDP) projections from Germany and the overall Eurozone. Most of the prints simply met market expectations.

France and The Netherlands’ latest unemployment rate figures were slightly better than expected.

US Dollar (USD) Exchange Rates Rebound Thanks to US Data

US Dollar bears took profit from the currency’s lows against the Euro on Friday, causing EUR/USD to slip back from its best levels in three years.

It followed days of falls for the US Dollar. Market demand for risk-correlated currencies left ‘safe haven’ investments like the US Dollar weaker, despite strong US data throughout the week.

According to a note from Commerzbank analysts;

‘The fact that the Dollar sell-off ran out of steam on Friday afternoon does not lead me to hope that it is over,

The Dollar bears did so well recently that there was time for profit-taking ahead of the weekend. That does not mean that they might not be selling Dollar again today with renewed enthusiasm,’

Analysts also predict that investors are not convinced that US inflation will last. While US inflation figures have been strong lately, unpredictable inflation throughout 2017 has left uncertainty.

The latest US data has generally supported the US Dollar but has not been enough to help the currency to make a lasting recovery.

Friday’s US Michigan University consumer sentiment projections for February, for example, unexpectedly improved to 99.9, while US building permits and housing starts came in much better than expected in January.

Euro to US Dollar (EUR/USD) Forecast: Eurozone Confidence Data in Focus

Multiple influential Eurozone confidence ecostats will be published on Tuesday, which could cause some movement in the Euro if they surprise investors.

ZEW will publish its German and Eurozone economic confidence surveys for February. The report will be followed later in the day by February’s consumer confidence projections for the Eurozone.

The Eurozone confidence figures, in particular, could prove influential. If they fall short of expectations for example, investors could become concerned that confidence in the bloc’s continued economic strength is weakening.

The US Dollar, on the other hand, is unlikely to see much shift in movement until key US data is published on Wednesday.

Wednesday will see the publication of Markit’s US PMI projections for February, as well as US existing home sales stats from January.

The most influential news due on Wednesday however, will be the Federal Reserve’s latest meeting minutes report. If the Fed shows increasing confidence about the sturdiness of US inflation, Fed rate hike bets could rise and the US Dollar may benefit.

Key Eurozone data will be published on Wednesday too, including Markit’s February PMI projections.