UPDATE
The Euro to US Dollar (EUR/USD) exchange rate was trending within a limited range in the early stages of Wednesday’s European session.
German economic data results fell slightly short of expectations, although this hasn’t had a huge impact on the Euro given that the data was still comparatively robust. September’s German Manufacturing PMI came in at 52.5; slightly below the market consensus of 52.8. September’s German Services PMI also missed the median market projection of 54.7 with the actual result coming in at 54.3.
After July’s US House Price Index bettered estimates, the US Dollar is holding a strong position. Futures traders have brought forward bets as to the timing of a Federal Reserve rate hike, after some notable officials made hawkish comments, which is supporting demand for the ‘Greenback’ (USD). US Mortgage Applications and the Manufacturing PMI will likely cause volatility for the North American asset.
The Euro to US Dollar (EUR/USD) exchange rate is currently trending in the region of 1.1129.
Yesterday…
EUR/USD Conversion Rate Predicted to Soften ahead of Eurozone Consumer Confidence
The Euro to US Dollar (EUR/USD) exchange rate softened by around -0.4% on Tuesday afternoon.
With a complete lack of inflationary pressures amid soft commodity prices, many traders speculate that the European Central Bank (ECB) will look to ease monetary policy. Whether this is by a rate cut or by expanding quantitative easing is yet to be seen, but the Euro remains comparatively strong despite recent depreciation which would suggest added liquidity would be the method they would adopt. One of the more vocal doves was the Bank of Italy’s top economist Eugenio Gaiotti. Gaiotti stated that the ECB should be careful not to fall behind the curve given mounting risks to growth and inflation. As traders prepare for September’s Eurozone Consumer Confidence print, the common currency softened versus most of its currency competitors.
‘I’m not too convinced that they are signalling they are ready to do something in October, but it does support our view that if nothing changes between now and December, the ECB may have to add more stimulus,’ said Elwin de Groot, senior market economist at Rabobank.
The Euro to US Dollar (EUR/USD) exchange rate is currently trending in the region of 1.1142.
USD/EUR Exchange Rate Forecast to Hold Gains after US House Price Index
Now that investors have digested the Federal Open Market Committee (FOMC) decision to hold the benchmark interest rate, the US Dollar has recovered its losses. Many economists’ believe that the dovish FOMC decision and the accompanying comments from Chairwoman Janet Yellen was a tactical move in order to prevent significant US Dollar overvaluation. A large proportion of traders still expect the Federal Reserve to hike the cash rate within 2015. Later on Tuesday, July’s US House Price Index has the potential to provoke ‘Greenback’ (USD) volatility.
Bank of America Merrill Lynch analysts stated; ‘A dovish Fed caught markets off-guard, with even those expecting an on-hold decision unprepared for a perceived dovish tone. Although our US economics team believes this is no more than a tactical delay and expect a hike in December, other central banks may feel that they have a ‘license to ease’ and markets could now spend the rest of the year speculating about the December meeting […] The dovish Fed delays but does not derail our call for parity in EUR/USD. We have revised our EUR/USD end-2015 projection to 1.05 from parity. Our projection still assumes the Fed will start hiking rates in December and the ECB will announce it will extend QE beyond September 2016.’
The US House Price Index advanced by 0.6% in July; bettering the median market forecast 0.4% growth.
The Euro to US Dollar (EUR/USD) exchange rate dropped to a low of 1.1127 in the early stages of Tuesday’s European session.
Euro to US Dollar (EUR/USD) Exchange Rate Forecast to Fluctuate ahead of Ecostats
With US Existing Home Sales and Eurozone Consumer Confidence data due for publication later on Tuesday, there is a high likelihood that the Euro to US Dollar (EUR/USD) exchange rate will fluctuate as the European session progresses. With that being said, the US Dollar should hold a comparatively strong position against the single currency given that many experts are convinced that the ECB will look to ease policy in the near-term.
The Euro to US Dollar (EUR/USD) exchange rate reached a high of 1.1208 in the early stages of Tuesday’s European session.
