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Will Euro to US Dollar Exchange Rate Strengthen on German Trade Balance Today?

The Euro was able to rise by 0.3% against the US Dollar yesterday after the European Central Bank (ECB) event and may be able to add to these gains today.

  • EUR USD rate climbs to 1.05 – USD EUR rate slides to 0.94
  • Euro bolstered by confident Draghi comments – Chance for firming on German stats
  • US Dollar unsettled by claims figures – Rally possible on unemployment rate drop
  • Major German confidence figures out next week – Fed rate hike on Wednesday is highly probable

While some had forecast another so-so press conference from ECB President Mario Draghi, the ECB’s top policymaker actually enabled a gradual advance for the Euro with his statements.

In the aftermath of the conference, Faraday Research Senior Market Analyst Jamie Dutta stated;

‘It was an interesting balancing act for Draghi between unchanged monetary policy stimulus policies and improved economic prospects. The market took the upgraded forecasts for growth and inflation in its stride. However, they reacted more positively when Draghi stated that there was no longer a “sense of urgency on taking further actions” to boost inflation and the recovery. Indeed, Draghi further said the “risks to deflation have largely disappeared”.

Draghi also inspired Euro trading by declaring that;

‘The Euro is here to stay. It’s not about whether or not it is irrevocable. It is’.

This raised confidence that the Eurozone may not be as risk-prone as first thought, which has been comforting a week before what may be a messy and troubling Dutch election on Wednesday.

Having previously been boosted by a much higher-than-expected US employment change on Wednesday, the US Dollar shed gains on Thursday due to initial jobless claims rising by more than expected in early March.

The Euro may be able to build on previous gains against the US Dollar shortly, as the German trade balance for January is expected imminently.

This previously showed a surplus of 18.7bn and could aid the Euro considerably if it rises today. Looking further ahead to next week, the EUR USD exchange rate is likely to appreciate if German confidence figures rise on Tuesday.

Near-term US Dollar gains may come from today’s non-farm payrolls stats, which are forecast to show unemployment falling and a rise in new jobtakers of around 190k persons.

This represents the last major influence on the Fed ahead of Wednesday’s interest rate decision, which is highly likely to cause a USD EUR rally if it brings a rate hike. At the time of writing, the odds were over 88%.

Current EUR USD Interbank Exchange Rates

At the time of writing, the Euro to US Dollar (EUR USD) exchange rate was trading at 1.05 and the US Dollar to Euro (USD EUR) exchange rate was trading at 0.94.