Focus Turns to USD after ECB Minutes Release
Analysts and investors turned their attention to minutes from the latest European Central Bank (ECB) policy announcement this afternoon and scoured the document for new details on the central bank’s policy plans.
The report revealed that not all policymakers were in agreement on stimulus, but also suggested that many other easing options had been discussed during the meeting.
The ECB’s council allegedly decided that there was ‘little evidence’ that investor-feared subzero rates would have negative effects. Members also discussed the possibility of a tiering rates system being introduced, similar to the system used by the Bank of Japan.
The EUR/USD pair has fallen over -0.4% throughout today’s session.
The Euro to US Dollar (EUR/USD) exchange rate has fluctuated since yesterday’s session in response to minutes released from the last Federal Open Market Committee (FOMC) policy meeting as well as wary anticipation of today’s European Central Bank (ECB) minutes.
Investors Pessimistic on Imminent European Central Bank (ECB) Minutes
Despite spiking on reactions to last night’s Fed commentary, the EUR/USD pair began to fall again this morning as investors readjusted ahead of today’s ECB-related events.
EUR/USD bounced back and forth through Wednesday’s session into today, hitting a weekly low of 1.1334 yesterday and them jumping to a weekly high of 1.1446 earlier this morning.
EUR/USD currently trades about -0.2% down from the morning’s opening levels, trending in the region of 1.1380.
Markets have reacted feverishly to recent central bank announcements in a break from the ‘Panama Papers’ focus that has dominated investor attention for most of the week thus far.
The ECB minutes may cause further EUR/USD shifts. The European Central Bank had previously announced radical easing measures for the Eurozone, but claims that further easing would be difficult strengthened the shared currency rather than weakening it. Today’s account of the ECB’s last monetary policy meeting is likely to shed some more light on what the central bank’s moves may be going forward.
ECB President Mario Draghi is also expected to meet with Portugal’s President this afternoon.
Investors Leave Both US Dollar (USD) and Euro (EUR) after Dovish Fed Remarks
It was in the middle of Wednesday’s session that investors began to readjust their positions and leave the US Dollar as they predicted FOMC minutes would dredge up the Fed’s dovish outlook towards interest rates.
However, while the minutes did indeed reveal that a consensus of policymakers saw an April rate hike as being too ‘urgent’, the USD’s weakening slowed after it was revealed that the decision was not unanimous.
The Wall Street Journal reports that some policymakers had indeed wanted ‘to raise rates as soon as April’. With it appearing that the bank is still on track to raise rates by 50 basis points this year, the USD’s losses were somewhat softened.
Optimistic PMI releases from China yesterday also suggested that the global economic situation was improving. An uncertain global outlook was something that Fed Chairwoman Janet Yellen had cited as a core reason for slowed interest rate adjustment.
Euro to US Dollar Exchange Rate Forecast: EUR/USD Unlikely to Climb This Week
While the Federal Reserve maintained a cautious but optimistic outlook to 2016 growth, investors seem more wary overall of the ECB’s confused and potentially unreliable policy.
Investors are still reeling from March’s ECB meeting at which President Draghi insinuated that the central bank had used all the tools in its arsenal, followed by claims from other policymakers later on that further easing was still possible.
It’s also possible that stoked fears that the United Kingdom could ‘Brexit’ from the European Union have slightly injured Euro sentiment.
The remainder of today’s session sees various important events. The ECB’s minutes are due for release in the early afternoon, followed by Draghi’s meeting with Portugal’s President a few hours later.
The US Dollar could also be strengthened slightly by incoming jobless claims prints. If forecasts ring true, continuing jobless claims should have fallen by around 3k in March. Consumer credit data is also expected.
The big finisher for the day will come tonight when Yellen speaks in New York. After Wednesday’s FOMC minutes, further insight into the Fed’s plans and the progress of the United States’ economy could be given at this speech.
The Euro to US Dollar (EUR/USD) exchange rate currently trends around 1.1380 while the US Dollar to Euro (USD/EUR) exchange rate trends in the region of 0.8685.