EUR/USD Exchange Rate Static ahead of US Durable Goods Orders Data
The Euro to US Dollar (EUR/USD) exchange rate was trending within a limited range on Tuesday morning.
As traders await US Durable Goods Orders data, and later the US Consumer Confidence report, the Euro to US Dollar exchange rate was trending statically. The Euro is forecast to hold recent gains versus the US unit, however, given concerns that the Federal Reserve will look to delay a benchmark interest rate hike.
Yesterday…
- Euro (EUR) strengthens on consolidative trading
- Lower-than-forecast German business confidence not enough to offset Euro (EUR) appreciation
- US Dollar (USD) holds weak position amid reduced Federal Reserve rate hike predictions
- EUR/USD exchange rate forecast to hold advantage ahead of Wednesday’s FOMC interest rate decision
Euro (EUR) Exchange Rates Climb on Corrective Trading
The Euro to US Dollar (EUR/USD) exchange rate strengthened by around 0.4% on Monday afternoon.
Last week the Euro softened considerably ahead of the European Central Bank (ECB) interest rate decision. Whilst ECB policymakers met with expectations and held the current base rate, the accompanying press conference was somewhat surprising.
President Mario Draghi was expected to jawbone following the interest rate decision, pressing home the need to expand stimulus measures to shore up inflation in the Euro-area. However, Draghi altered focus to boldly state that the policy measures were having a positive impact and that the ECB is the only major central bank to have achieved this in the recent past.
As a result, the single currency continues to trend higher as traders correct the pricing-in of a dovish press conference. This has allowed the shared unit to trend higher versus a number of its major peers despite registering less-than-ideal domestic data results.
Euro (EUR) Trending Higher despite Sliding German Business Confidence
April’s German IFO business confidence data unexpectedly slowed. IFO Business Climate scores dropped from 106.7 to 106.6 and IFO Current Assessment scores declined from 113.8 to 113.2. What’s more, April’s IFO German Business Expectations figures only rose from 100.0 to 100.4; missing the median market forecast 100.9.
‘The mood in the economy is good but not euphoric,’ IFO economist Klaus Wohlrabe stated following the disappointing IFO figures for April. ‘Consumption continues to support the economy and is a very strong pillar.’
The Euro to US Dollar (EUR/USD) exchange rate is currently trending in the region of 1.1258.
US Dollar (USD) Exchange Rates Hold Weak Position amid Reduced Fed Bets
Wednesday will see the latest Federal Open Market (FOMC) interest rate decision. With the majority of analysts predicting that policymakers will opt to hold the base rate, the US Dollar has endured reduced support over the past few trading days.
Following the previous interest rate decision, Fed Chairwoman Janet Yellen stated that external issues were a more pressing concern than improvements in the domestic economy that warrant higher rates. She was essentially stating that the improving domestic economy, as evidenced by domestic data, is not enough to provoke the Fed into action given the risks posed by China’s economic slowdown.
At the time, US data pointed towards positive economic growth. However, recent ecostats have been much less favourable, further fuelling predictions that the FOMC will avoid hiking rates for a considerable period to come.
Confirming this notion, Richard Franulovich, Research Analyst at Westpac stated;
‘It is still a challenging backdrop for the FOMC; a range of data suggesting Q1 growth will be sub-par while weak March import prices, PPI and CPI all suggest the recent jump in inflation may indeed prove transitory, much as Chair Yellen has said lately. It is therefore safe to assume this week’s Fed meeting will build on the aforementioned, the guidance likely to signal a lack of urgency once again. Even though energy prices have firmed and risks around China and global growth seem to have dissipated the Fed is more likely than not to repeat, “global economic and financial developments continue to pose risks”. The Fed is likely to shy away from characterising where the risks lie for another meeting too.’
The Euro to US Dollar (EUR/USD) exchange rate dropped to a low of 1.1222 during Monday’s European session.
EUR/USD Exchange Rate Forecast to Hold Losses ahead of US Durable Goods Orders
Although there will be a few US data publications later today, including March’s New Home Sales, the data isn’t likely to be high impact enough to offset current EUR/USD exchange rate gains. Coupled with a lack of further European ecostats to provoke changes, the Euro to US Dollar conversion rate is likely to hold gains for the remainder of Monday’s trade.
However, Tuesday could see significant volatility despite a complete absence of any high-impact European ecostats. Tuesday will see US Durable Goods Orders and Consumer Confidence, both of which are likely to provoke significant market volatility.
With that said, there is a high chance that expectations of Fed dovishness will overshadow domestic data. In that event, the US Dollar will continue to hold a weak position against the common currency.
Unless the Fed indicates that US interest rates are likely to be adjusted before Q4 2016 the ‘Greenback’ may fail to advance on its major currency counterparts.
The Euro to US Dollar (EUR/USD) exchange rate reached a high of 1.1270 during Monday’s European session.
