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Exchange Rate Forecast – Euro to US Dollar to hold decline before ECB announcement

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While some economists are betting that the latest batch of better-than-forecast Eurozone data will persuade the European Central Bank to leave fiscal policy unaltered when it meets tomorrow, the Euro is still feeling the pressure.

The common currency edged lower against the US Dollar even as the safe-haven asset weakened in response to the calming situation in the Ukraine and disappointing US news.

This morning the Eurozone’s economic outlook was brightened by surprisingly upbeat services PMI, growth and retail sales figures for the currency bloc.

Some investors believe that these reports, when viewed in conjunction with last week’s better-than-expected inflation data, may prevent the ECB introducing an additional interest rate cut.

In the words of Nick Matthews, the data ‘should give them confidence that the recovery, albeit modest, is still ongoing. What it will mean is that there are no revisions to the ECB’s forecasts when it publishes the staff projections.’

However, other industry experts believe that the ECB will have to introduce additional easing measures, and as a consequence the Euro weakened against peers like the US Dollar and Pound.

During the North American session a report revealed that US companies added fewer positions than expected last month.

With the influential US non-farm payrolls report out on Friday, the news that companies increased employment by just 139,000 in February was disappointing.

Economists had expected an increase of 155,000.

January’s gain was negatively revised to 127,000.

Economist Mark Zandi said this of the data; ‘Employment was weak across a number of industries. Bad winter weather, especially in mid-month, weighed on payrolls. Job growth is expected to improve with warmer temperatures’.

Separate US data showed that mortgage applications increased by 9.4 per cent in the week ending February 28th following a 8.5 per cent decline the previous month.

Meanwhile, the US ISM non-manufacturing composite index weakened by more-than-predicted. Although staying above the 50 mark separating growth from contraction, the gauge came in at 51.6, down from 54 in January and significantly lower than the 53.5 reading expected.

Further EUR/USD fluctuations may occur before the close of North American trading in response to the release of the Federal Reserve’s Beige Book (taking place at 19:00 GMT).

Although tomorrow’s German factory orders report will be of interest, the ECB rate decision will be the day’s major cause of market movement.

Investors will also be taking an interest in US initial jobless claims and factory orders figures.

Euro (EUR) Exchange Rates

[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate , 
Euro,,US Dollar,1.3728,
Euro,,British Pound,0.8214,
Euro,,Australian Dollar,1.5295,
Euro,,New Zealand Dollar,1.6326,
Euro,,Canadian Dollar,1.5203,

As of 15:15 GMT