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EUR/USD Exchange Rate Forecast to Dive after Dovish Draghi Renews December Easing Fears

Euro to US Dollar (EUR/USD) Conversion Rate Predicted to Soften after VW Shares Plunge 10%

The Euro to US Dollar (EUR/USD) exchange rate declined by around -0.9% on Wednesday afternoon.

The common currency declined overnight following a dovish speech from European Central Bank (ECB) President Mario Draghi who confirmed the bank’s intention to expand accommodative policy should it prove necessary. Single currency losses continued on Wednesday morning after domestic data showed that both German and Eurozone Services and Composite PMIs failed to grow in line with expectations.

Also weighing significantly on demand for the shared currency is renewed concerns regarding the Volkswagen emissions scandal. VW shares plunged 10% after news emerged that the emissions cheat was not just used in diesel vehicles. Analysts at UBS have suggested that this scandal could cost the German carmaker as much as €35 billion. ‘We continue to appreciate the speed and thoroughness demonstrated by new CEO Matthias Műller in dealing with these issues, and have estimated product fixing costs as high as €10bn in addition to litigation and fines (for a total €35bn). This development will however certainly add to pressure on VW shares and on-going concerns about costs as well as ethics and governance at the group level.’

The Euro to US Dollar (EUR/USD) exchange rate is currently trending in the region of 1.0966.

US Dollar to Euro (USD/EUR) Exchange Rate Predicted to Hold Gains after ADP Employment Change Betters Estimates

After a number of US economic data publications produced less-than-ideal results of late, fears that the Federal Reserve will avoid hiking the benchmark interest rate in December has seen subdued ‘Greenback’ (USD) trade. ‘The Fed’s in data-dependent mode, and so markets should take their cue from the numbers,’ said Mark Dowding, a money manager in London. ‘Stronger data could lead to renewed Fed optimism.’

However, positive results from US economic data may go some way to allaying feras regarding Fed rate hike delays. ADP Employment Change bettered the median market forecast 180,000 newly employed with the actual result for October reaching 182,000. In addition, the ISM Non-Manufacturing Composite for October surged above expectations of 56.5 with the actual result reaching 59.1.

The Euro to US Dollar (EUR/USD) exchange rate dropped to a low of 1.0863 during Wednesday’s European session.

Euro to US Dollar (EUR/USD) Exchange Rate Forecast to Hold Losses ahead of German Factory Orders

With an absence of further European economic data to affect changes, the single currency is likely to continue holding a weak position as the VW scandal weighs on sentiment.

Thursday is likely to see EUR/USD volatility despite the fact that market focus is will be dominated by the Bank of England (BoE) interest rate decision, minutes and quarterly inflation report. German and Eurozone Retail Sales and German Factory Orders data and US labour market data will be of interest to those trading the EUR/USD.

The Euro to US Dollar (EUR/USD) exchange rate climbed to a high of 1.0966 during Wednesday’s European session.