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Weekly Forecast: Will EUR USD Rate be Strengthened by Eurozone Jobs Stats?

The Euro steadily dropped against the US Dollar last week, but could recoup its losses with a run of positive data in the coming week.

  • EUR USD dropped from 1.08-1.06 last week – USD EUR rose from 0.92-0.93
  • Euro weakened by lower ECB rate hike odds – Falling inflation worsened EUR demand
  • US Dollar advanced on Fed hawkishness – Trump policies remained controversial
  • Eurozone unemployment forecast to drop – Fed minutes may boost USD

Euro US Dollar trading repeatedly suffered last week, owing to Brexit-induced instability and a poor spread of data over Thursday and Friday.

The main news was that after rising to 2% in February, Eurozone inflation was estimated to have dropped to 1.5% in March. Summarising what this meant for the Eurozone was Politico European Economics Correspondent Johanna Treeck;

‘Headline inflation slumping below the ECB’s prices target of just below 2% will make it easier for [ECB President] Draghi to resist calls from hawkish policymakers to start preparing for an exit from its ultra-easy policies. With the next ECB monetary policy meeting [coming between] two rounds of French presidential elections, the last thing Draghi will want is [to] signal further draw-down in stimulus and perhaps be forced into a reversal in case of a victory by the far-right, anti-Euro candidate, Marine Le Pen’.

Additional uncertainty was sparked by Thursday’s Eurozone confidence scores proving largely disappointing and by German inflation additionally dropping.

The US Dollar was initially shaken last week by a controversial Trump plan to bring jobs back to the mining and resources sectors. This entailed repealing former President Barack Obama’s pledges to lower the US’s contribution to climate change, which drew heavy criticism from environmental groups.

As the week progressed, however, the US Dollar’s value shot up due to rising hopes of more Fed interest rate hikes in 2017. In particular, John Williams stated there could be more than three rate hikes this year, while Eric Rosengren voiced support for four.

In the coming week, the Euro get an early rise against the US Dollar if Monday’s Eurozone unemployment rate falls as forecast. Other near-term Eurozone announcements will include PMIs on Monday and Wednesday as well as retail sales on Tuesday.

Eurozone PMIs are all set to rise, while retail sales are predicted to rise on the month but dip annually in February.

Outside of any surprise Trump announcements, the US Dollar could be shifted in the week ahead by Monday’s ISM manufacturing figures. In March, a manufacturing PMI slide is expected that could weaken USD.

Elsewhere, the national trade deficit is predicted to decrease on Tuesday while Fed minutes on Wednesday may boost the USD if they are hawkish in tone.

Recent Interbank EUR USD Exchange Rates

At the time of writing, the Euro to US Dollar (EUR) USD) exchange rate was trading at 1.06 and the US Dollar to Euro (USD EUR) exchange rate was trading at 0.93.