Euro (EUR) Exchange Rate Dives against the ‘Greenback’ (USD) after ECB Cuts Growth and Inflation Forecasts into 2017
The Euro to US Dollar (EUR/USD) exchange rate dived by around -1.0% on Thursday afternoon.
In the early stages of Thursday’s European session the single currency advanced versus its major peers. This was thanks to comparatively positive economic data which saw Euro-area Services and Composite PMIs better estimates (with the exception of France). Additionally, Eurozone Retail Sales in July came in at 2.7% growth on the year; bettering the market consensus of 2.0% growth.
Euro gains were relatively short-lived, however, despite the European Central Bank (ECB) keeping interest rates unchanged. The single currency depreciation was the result of the accompanying statement from ECB President Marion Draghi. Draghi’s dovish speech showed that the ECB cut growth and inflation forecasts into 2017 and allowed officials to buy larger amounts of Euro-area nations debt. This is mostly due to the lack of growth in consumer prices as weak commodity prices dampen inflationary pressures.
The Euro to US Dollar (EUR/USD) exchange rate is currently trending in the region of 1.1106.
US Dollar (USD) Exchange Rate Rallies against the Common Currency (EUR) after Positive Data Fuels 2015 Fed Rate Hike Speculation
After the publication of the Federal Reserve Beige Book during Wednesday’s North-American session, the US Dollar advanced versus most of its major peers. The report showed that US officials were confident regarding the rate of expansion on the world’s largest economy. This led many rate hawks to speculate that the Fed will hike the cash rate within 2015.
Thursday’s US data produced mixed results erring towards the positive. Of particular significance was the ISM Non-Manufacturing Composite for August, which bettered the median market forecast drop from 60.3 to 58.2, with the actual result only falling to 59.0. This will also stoke near-term rate hike bets and overshadows slightly disappointing results from Continuing Claims and Initial Jobless Claims.
The Euro to US Dollar (EUR/USD) exchange rate has fallen to a low of 1.1106 during Thursday’s European session.
Euro to US Dollar (EUR/USD) Exchange Rate Forecast to Trend Lower ahead of German Data
Given the absence of further data publications to provoke changes, and with sentiment towards the ECB cooling following Draghi’s dovish speech, the Euro to US Dollar (EUR/USD) exchange rate is likely to hold losses for the remainder of Thursday’s North-American session.
Friday is likely to see heightened EUR/USD volatility with several data publications pertaining to both nations due for release. German Factory Orders, German Construction PMI, German Retail PMI and Eurozone Retail PMI will all be of interest to those trading with the Euro. In terms of US data, Change in Non-Farm Payrolls and Unemployment Rate will be of most significance.
The Euro to US Dollar (EUR/USD) exchange rate reached a high of 1.1243 during Thursday’s European session.