Euro to US Dollar (EUR/USD) Exchange Rate Eases Lower despite Fed Interest Rate Speculation
The Euro to US Dollar (EUR/USD) exchange rate was trending in the region of 1.1814 on Monday, down 0.2% on the day’s opening levels.
While the common currency derived some support from speculation that the European Central Bank intends to roll out a smaller quantitative easing scheme than expected, demand for the Euro will be limited in the run up to the ECB meeting and Greek general election.
Data is lacking today, but Euro to US Dollar (EUR/USD) exchange rate movement could be inspired by the US Labour Market Conditions Index and comments to be issued by ECB official Ewald Nowotny.
The Euro to Pound Sterling (EUR/GBP) exchange rate, meanwhile, spent the European session trending around the day’s opening levels.
The Pound was trading close to an 18-month low against the US Dollar. According to currency strategist Jeremy Stretch; ‘Markets are mindful of the upcoming data points, particularly those CPI numbers. The Bank of England is going nowhere fast. Sterling looks like it’s going to remain under some pressure.’
The Euro to US Dollar (EUR/USD) exchange rate advanced on Friday as the US Dollar was pulled lower by disappointing US wage growth figures and Federal Reserve interest rate hike speculation.
However, the Euro to Pound Sterling (EUR/GBP) exchange rate closed out the week in a softer position as positive UK manufacturing and trade balance reports offered a sharp contrast to below-forecast German trade and industrial production stats.
EUR/USD Exchange Rate Forecast to Fluctuate on US CPI, Retail Sales Data
At the close of the week the Euro managed to stage a modest rally against the ‘Greenback’ as demand for the North American currency was undermined by comments issued by a Federal Reserve official.
The US Dollar posted widespread declines as the President of the Federal Reserve Bank of Minneapolis, Narayana Kocherlakota, asserted that the central bank ‘can best achieve its macroeconomic objectives by not raising the fed funds rate target this year. Raising the target range for the fed funds rate in 2015 would only further retard the pace of the slow recovery in inflation.’
The Euro to US Dollar (EUR/USD) exchange rate brushed a low of 1.1761
As investors had been pricing in a rate hike taking place in the first half of 2015, the remarks pulled the US Dollar lower.
The currency continued trending in a weaker position against peers like the Euro as US average earnings fell in December. The slide in wages offset the stronger-than-anticipated jobs gain.
According to The Guardian; ‘Average earnings paid to US workers fell by 0.2% in December, dashing hopes of a 0.2% rise. Year-on-year, wages are only up by 1.7%. That’s disappointing, showing that the recovery isn’t feeding into workers’ wallets. More people are getting jobs, but they’re not getting the pay rises needed.’
In the week ahead economic reports for the Eurozone are limited, so it will be US figures driving EUR/USD fluctuations.
The US is set to publish retail sales and inflation data – and both reports could have a profound impact on the currency market. Decelerating inflation would be US Dollar negative, as would a below-forecast increase in retail sales.
The Euro to US Dollar (EUR/USD) exchange rate achieved a high of 1.1844
As stated by analyst Robin Brooks; ‘The Fed is thinking about exit, the ECB’s thinking about more stimulus — that’s the recipe for big trends in FX. There’s a lot of reasons to think this Euro move can keep going.’
Euro to Pound Sterling (EUR/GBP) Exchange Rate Movement Forecast on UK Inflation Stats
News that the UK’s trade deficit narrowed and manufacturing production surged gave the Pound a boost on Friday and the British currency was able to record a daily gain against the Euro.
However, Sterling could pare its advance against the common currency next week if the UK’s inflation report shows the deceleration in consumer price gains predicted by economists.
The Euro to Pound Sterling (EUR/GBP) exchange rate rose to a high of 0.7824
Annual inflation is believed to have eased from 1.0% to 0.8%. If that proves to be the case it will further reduce the odds of the Bank of England (BoE) increasing interest rates in 2015 and leave the Pound struggling.
The Euro to Pound Sterling (EUR/GBP) exchange rate sank to a low of 0.7781
That being said, speculation surrounding the European Central Bank’s potential introduction of quantitative easing measures will keep the Euro under pressure of its own.
The Euro to US Dollar (EUR/USD) exchange rate closed out the week trading in the region of 1.1833
The Euro to Pound Sterling (EUR/GBP) exchange rate closed out the week trading in the region of 0.7803
On Sunday the Euro to Pound Sterling (EUR/GBP) exchange rate was trading in the region of 0.7810