European Central Bank (ECB) Pessimistic Outlook on Eurozone Growth Sees Euro (EUR) Plummet
The Euro is currently trading lower against the major currencies following a speech from President of the ECB Mario Draghi. His comments furthered the case for an extension of quantitative easing or a potential rate cut as Eurozone growth remains surprisingly sluggish compared to previous performances following periods of recession.
The EUR/USD exchange rate is currently trending down -0.4% between 1.0662 and 1.0728.
Earlier…
After experiencing a steady rise over the last couple of days the Euro has begun another slump. President of the European Central Bank (ECB) Mario Draghi has spoken this morning at the Euro Finance Week conference. His remarks continued to reinforce the idea that the ECB will increase quantitative easing from €60 billion per month in order to boost the flagging Eurozone economy.
Euro to US Dollar Exchange Rate: -0.4% Drop as Draghi Highlights Eurozone Economic Weakness
In a speech given during this morning’s European session, Mario Draghi has highlighted several key risks that the ECB must be aware of as it pushes to reach the target inflation rate of 2%. As well as a weak global market and lacklustre growth, Draghi highlighted that the rate of Eurozone recovery has been sluggish compared to that following previous recessions.
‘It took between five and eight quarters for the countries now making up the Euro area to recover their pre-recession level of real output after the slumps of the 1970s, 1980s and 1990s…. If our current assessment is correct, it will take the Euro area 31 quarters to return to its pre-crisis level of output – that is, in 2016 Q1.’
Since Draghi’s speech commenced, the EUR/USD exchange rate has fallen to trade around 1.0696.
USD/EUR Exchange Rate Rises After Yesterday’s Slump Caused by Trader Profit Taking
The US Dollar spent yesterday trading down against most of the major currencies, despite the release of minutes from the Federal Open Market Committee (FOMC) October gathering. The minutes, which reinforced Fed statements that it would make a decision on interest rates based upon the economic data due out before the next meeting in December, were interpreted as mildly dovish by some investors and analysts.
Even though recent US data has been mostly positive – more than enough for the likelihood of a 0.5% rate hike to rise to 72% – investors noted the cautious tone taken by policymakers, who were careful not to be seen promising a rise. The ‘Buck’ saw a drop in demand as traders sold the high-value asset.
The USD/EUR has since been on the rebound, with the Euro weakened by further Draghi dovishness and the US Dollar strengthened by a consistently low number of Jobless Claims. Posting at 271,000, the number of people on unemployment benefits has remained below 300,000 for 37 weeks. This is considered a sign of a healthy jobs market and economists claim there is little room for the number to drop as the market reaches full employment.
The USD/EUR exchange rate is currently trending between 0.9319 and 0.9371.
EUR/USD Exchange Rate Forecast: Heavy Data Week Could See Volatile Trading
In a week of ample data, the EUR/USD exchange rate is likely to see volatile trading against the background of a common currency weakened by the chance of further monetary stimulus and the ‘Greenback’ strengthening ahead of the next FOMC meeting.
The Eurozone sees Markit PMIs and German Gross Domestic Product on Monday and Tuesday respectively, while for the US the focus will be on Tuesday’s GDP, Personal Consumption and Consumer Confidence Index.
The EUR/USD exchange rate is currently trading between 1.0662 and 1.0728.
