The Euro to US Dollar (EUR/USD) exchange rate was trending within a limited range on Wednesday morning.
With all eyes towards the Federal Reserve as the Federal Open Market Committee (FOMC) make their policy decision, the US Dollar is generally holding steady versus most of its major competitors. Should they retire tired rhetoric the Dollar is likely to rally significantly.
The Euro, meanwhile, edged higher versus the majority of its most traded currency competitors. This can be attributed to mounting positive sentiment towards the European Central Bank (ECB) after quantitative easing was launched in the Eurozone.
The Euro to US Dollar (EUR/USD) exchange rate is currently trending in the region of 1.0604.
Yesterday…
The Euro to US Dollar (EUR/USD) exchange rate advanced by around 0.52% on Tuesday afternoon.
After a spate of profit-taking and trader reluctance to invest heavily before the Federal Open Market Committee (FOMC) convene to discuss policy outlook, the US Dollar softened versus many of its most traded currency rivals. Housing starts registered a four-year low result which has kept downside pressure on the ‘Buck’ (USD).
The Euro, meanwhile, strengthened in response to positive comments from European Central Bank (ECB) President Mario Draghi. Additional appreciation is as a result of mostly positive results from domestic data publications.
The Euro to US Dollar (EUR/USD) exchange rate is currently trending in the region of 1.0631.
Euro (EUR) Exchange Rate Strengthens as Core Inflation Rises
In the wake of a hawkish speech made by Mario Draghi on Monday, the shared currency advanced versus a basket of currencies. Draghi’s reassurances that the Eurozone is steadily recovering, in conjunction with highlighting the positive impact of quantitative easing at this early stage, caused heightened demand for the common currency.
European economic data printed positively on Tuesday. Eurozone Core Consumer Prices advanced by 0.7% on the year in February, bettering the median market forecast of 0.6%. The German ZEW Survey for Economic Sentiment came in at 54.8 in March, eclipsing the previous figure of 53.0 but failing to meet with the forecast figure of 59.4. The Eurozone ZEW Economic Sentiment Survey advanced from the previous figure of 52.7 to 62.4.
The Euro to US Dollar (EUR/USD) exchange rate has fallen to a low today of 1.0548.
US Dollar (USD) Exchange Rate Softens as Housing Starts Cool
After having unseasonably cold weather over the past month or so, new house builds in the US dropped to a four-year low. ‘It was just the weather, basically,’ said Richard Moody, chief economist at Regions Financial Corp. in Birmingham, Alabama. Still, ‘my view of the recovery in single-family housing is that it’s coming more gradually than others think.’
Additional Dollar declination can be attributed to a reluctance to invest ahead of the FOMC meeting to determine policy outlook. Although most don’t expect the Federal Reserve to exact any changes at this stage, the position of the Dollar will be determined by the language used.
‘Our view is that the Federal Reserve will indeed drop the word ‘patient’ from the statement but it will be very cautious nonetheless,’ said Alvin Tan, currency strategist at Societe Generale in London. ‘The profit-taking continues from yesterday following the poor US data that we had and the market is being cautious ahead of the FOMC meeting.’
Euro to US Dollar (EUR/USD) Exchange Rate Forecast to Trend Higher
Given the dampened demand for the ‘Buck’ ahead of the interest rate decision, and with a lack of domestic data to provoke changes, the Euro to US Dollar (EUR/USD) exchange rate is likely to continue trending higher during the European session.
Wednesday should see heightened EUR/USD volatility with the FOMC meeting conclusion and post-meeting conference.
The Euro to US Dollar (EUR/USD) exchange rate climbed to a high of 1.0651 today.
