The Euro to US Dollar (EUR/USD) exchange rate fell to a fresh two and a half year low on Tuesday as data out of the USA showed that the world’s largest economy at its fastest pace in more than ten years in the third quarter of 2014.
With trading volumes light due to many investors and traders being away for the Christmas and New Year holiday period the US Dollar was able to surge on the back of strong US economic growth figures.
According to the data released by the Washington based Commerce Department the US economy expanded by its quickest pace in 11 years adding pressure on the Federal Reserve to raise interest rates earlier.
The department revised up its third quarter GDP estimate from last month’s estimate of 3.9% to 5% at an annual rate. The cause of the upward revision was said to be a result of stronger consumer and business spending.
It was the fastest pace of growth since the third quarter of 2003. GDP growth has now been revised higher by 1.5% since the first estimate was published in October.
‘The upward revision to third-quarter annualised GDP growth, to 5.0% from 3.9% (consensus of 4.3%), left the economy expanding at its fastest rate in 11 years. The revision was mainly due to faster consumption growth (3.2% vs 2.2%). That was despite a downward revision to annualised growth of real disposable incomes (to 2% from 2.3%), which suggests households reduced their saving rate,’ said Paul Dales from Capital Economics.
The strong rise in GDP was down to firming consumer spending which increased by 3.2%, the fastest increase seen since the final quarter of 2013, and was revised higher from the previous figure of 2.2%. Business investment increased from 7.1% to 8.9% as spending on property, equipment and intellectual property rose.
The Euro to Pound Sterling (EUR/GBP) exchange rate meanwhile firmed but remained trading in the 0.78 region as UK data disappointed. Economic growth was revised lower from 3% to 2.6% and the nation’s current account deficit widened to 6% of GDP.
Greek Concerns Forecast to weigh on Euro (EUR) Exchange Rate
Greek Prime Minister Antonis Samaras failed to generate enough support to elect a new president in the second round of voting earlier today, raising concerns that a snap general election could be on the cards if 12 more votes cannot be found in the final round of voting next week.
The parliament must elect a president or a general election will have to be held by February. It would be a vote that Samaras is likely to lose and the anti-austerity Syriza party win.
Euro Exchange Rates:
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