German Services Growth Unexpectedly Slows, EUR Softens
The Euro to US Dollar (EUR/USD) exchange rate ticked fractionally lower by around -0.1% on Friday morning following mostly disappointing German data.
Both the German Services and Composite PMIs saw growth unexpectedly slow in April. The Euro depreciation has been minimal, however, after Germany’s Manufacturing PMI managed to eclips the median market projection.
ECB Leaves Rates on Hold, Euro (EUR) Climbs
The Euro to US Dollar (EUR/USD) exchange rate surged by 0.6% on Thursday as the European Central Bank (ECB) decided to leave interest rates on hold at it’s latest policy gathering.
While the decision was largely expected, the common currency still benefited from the news.
The US Dollar, meanwhile, derived little support from the news that initial jobless claims came in below-forecast.
Tomorrow’s USD Markit Manufacturing PMI is likely to inspire further EUR/USD movement.
As the European session progressed the EUR/USD exchange rate was trending in the region of 1.1370
- Euro exchange rates edge higher on US Dollar weakness
- US Dollar exchange rates struggle against reduced Federal Reserve rate hike bets
- Will Draghi speech provoke EUR/USD volatility?
- US Dollar forecast to hold losses ahead of Home Sales data
Euro (EUR) Exchange Rates Edge Higher despite Weak German Producer Prices
Despite weaker-than-expected domestic data results, the single currency ticked higher versus most of its major peers. March’s German Producer Price Index was expected to hit 0.2% on the month, but the result actually came in at 0.0%. Additionally, annual German Producer Prices contracted by -3.1% in March which missed the market consensus of -2.9%.
Whilst the common currency has enjoyed some temporary relief from US Dollar weakness, a number of analysts predict Euro losses in the medium to long-term thanks to policy divergence between the Federal Reserve and the European Central Bank.
Also weighing on Euro futures is weakness deriving from political uncertainty in connection with the UK’s EU referendum. If the UK votes to leave the EU it will have a massive impact on the Euro as well as the British Pound. However, thus far traders have only priced-in ‘Brexit’ uncertainty to the Pound, so the Euro is likely to come under pressure as we draw closer to the June 23rd vote.
The Euro to US Dollar (EUR/USD) exchange rate is currently trending in the region of 1.1370.
US Dollar (USD) Exchange Rates Forecast to Soften on Political Uncertainty
Following several recent dovish speeches from Federal Reserve officials with regard to the timing of a cash rate increase, US Dollar exchange rates have cooled.
One of those officials was Federal Reserve New York President William Dudley, who echoed a speech from Chairwoman Janet Yellen about the need to be cautious when approaching tighter policy.
‘After years at the effective lower bound for short-term interest rates, economic conditions have finally warranted the start of US monetary policy normalization,’ stated Dudley. ‘But these monetary policy adjustments are likely to be gradual and cautious, as we continue to face significant uncertainties and the headwinds to growth from the financial crisis have not fully abated,’ he added.
Also weighing heavily on demand for the US Dollar is political uncertainty as candidates attempt to become head of their respective political parties. Given that some of the more controversial figures are gathering momentum at a surprising pace, USD investors have been cautious even when safe-haven demand has been prominent.
The Euro to US Dollar (EUR/USD) exchange rate dropped to a low of 1.1347 during Wednesday’s European session.
EUR/USD Exchange Rate Forecast: Draghi Speech to Provoke Volatility
With European Central Bank (ECB) President Mario Draghi due to make a speech today, there is a high chance that the EUR/USD exchange rate will be subject to increased volatility. This is especially true if Draghi continues to reiterate his stance on the use of further stimulus measures if required.
Also likely to cause EUR/USD exchange rate movement will be US Housing data due for publication later this afternoon. The US oil inventories data may also have an impact on the wider currency market as a further drop in the price of crude will limit the appeal of risk-sensitive assets.
The Euro to US Dollar (EUR/USD) exchange rate reached a high of 1.1380 during Wednesday’s European session.