EUR/USD Up Over 50 Pips on ZEW Survey, Poor US Data
Since the ZEW indication of economic sentiment was released earlier today, the Euro (EUR) has sailed upwards against the weakened US Dollar (USD).
The Euro’s gains were only strengthened when fresh United States data printed well below forecasts in every report, causing further damage to ‘Greenback’ sentiment.
Projected to worsen from 5.2% to only -0.7%, housing starts data instead scored a bearishly disappointing -8.8% in March.
March’s building permits report fared even worse. Initially estimated to escape contractions of -2.2% with a score of 2.0%, the print came out with an even bigger contraction of -7.7%.
Wednesday sees the release of US Existing Home Sales data. If this report also falls short of forecasts the Euro could rally against the US Dollar as Fed rate hike bets get pushed further back.
- ECB Bets Weigh on Euro (EUR) – Analysts predict next easing action in September
- ZEW Survey Report Optimistic – Eurozone economic sentiment up from March
- NAHB Housing Market Data Disappoints – April’s release prints below expectations
- Forecast: Housing, Building Data Due from US – May not beat back strong ZEW data
The Euro to US Dollar (EUR/USD) exchange rate has been flat now for well over half a week, with investors fixating on the fiscal policy adopted by both Eurozone and US central banks amid a lack of notable data.
However, after the release of Tuesday’s ZEW survey the pairing began moving in the Euro’s (EUR) favour. EUR/USD currently trades at around 1.1338 – around 50 pips up from the week’s opening levels of 1.1284.
Euro (EUR) Investors Steady as ZEW Surveys Impress
Tuesday’s session saw the release of the ZEW economic sentiment and current situation surveys
Two reports were released for Germany, a current situation print and an economic sentiment print. The first report unfortunately printed at 47.7 from March’s 50.7, but the latter printed at a much more optimistic 11.2, improving from 4.3.
The most anticipated release was the general Eurozone economic sentiment report, which scored 10.6 in March. Despite forecasts it would improve to 13.9, it jumped to 21.5 in a hugely positive release.
Previously, the Euro (EUR) had been weakened by an increase in analysts predicting that even further easing measures were in the European Central Bank’s (ECB) future.
A survey taken and released by Bloomberg indicated that a majority of investors predict that ECB President Mario Draghi will act on stimulating the Eurozone economy once more in the second half of 2016, with most estimating September’s ECB meeting as the most likely time.
US Dollar (USD) Uninspired on Fed Dovishness, NAHB Housing Report
Despite a hike in demand for safer currencies on OPEC’s failure to resolve the global oil prices crisis, the ‘safe-haven’ US Dollar has been unable to weaken the volatile Euro.
This is due to Federal Reserve policymakers maintaining a dovish stance throughout April thus far, in conjunction with a slew of underwhelming data released from the United States last week.
Friday’s University of Michigan Confidence report came in at a disappointing 89.7, despite estimates that it would improve from 91.0 to 92.0.
More recently, the NAHB housing market index report released during Monday’s session also weighed on an uninspired ‘Greenback’. Despite being projected to improve from 58 to 59, it remained at 58, which disappointed investors further.
Federal Reserve Bank of Boston Chief Eric Rosengren has recently criticised investors for their attitude towards US assets, Reuters writes;
The Federal Reserve is set to hike interest rates more rapidly than investors currently expect, a top Fed official said on Monday, again pushing back on what he said was investors’ too pessimistic view of the US economy and monetary policy.
Euro to US Dollar Exchange Rate Forecast: Housing Data Could Slow EUR/USD Gains
Despite ongoing concerns from analysts towards the European Central Bank’s (ECB) future easing and general anxiety towards the bank’s upcoming rate decision (due on Thursday), the Euro is likely to gain on the US Dollar following today’s news.
US data due for release later today could put pressure on the Euro if it prints positively however.
Housing starts and building permits reports are expected in the early-afternoon, and while housing starts are forecast negatively at -0.7%, building permits will escape contraction if they score the predicted 2.0%.
The Euro to US Dollar (EUR/USD) exchange rate currently trends in the region of 1.1338, while the US Dollar to Euro (USD/EUR) exchange rate trades around 0.8817.