Dovish Federal Open Market Committee (FOMC) meeting minutes spurred the EUR/USD pairing upwards as the Euro (EUR) was boosted by eased concerns of European Central Bank (ECB) monetary loosening measures.
European Central Bank (ECB) Comments Spurred Fresh Rally for EUR/USD Exchange Rate as Grexit Fears Faded
Although the week has been a volatile one for the EUR/USD exchange rate the pairing has seen a general uptrend which brought it to a fortnightly high of 1.1373. This was for the most part in spite of Eurozone data releases, as German figures in particular demonstrated continued signs of economic slowing. Domestic Factory Orders, Industrial Production and Trade Balance data all came in below forecast to indicate that the economic powerhouse of the currency union is not as robust as some might have thought.
Nevertheless the Euro (EUR) was buoyed by the release of the European Central Bank (ECB) minutes for the September policy meeting. Although policymakers did express concerns over increasing emerging market pressures and negative wider economic trends comments also suggested that the central bank remains somewhat hesitant to resort to fresh monetary loosening measures. As progress has also been evident towards the successful securing of the next tranche of Greek bailout funds, with the current government led by Prime Minister Alexis Tsipras winning a parliamentary vote of confidence, common currency trade has remained optimistic ahead of the new week.
US Dollar (USD) on Bearish Trend with Disappointing Domestic Data and Federal Open Market Committee (FOMC) Dovishness
Prospects have been decisively more negative for the ‘Greenback’ (USD), on the other hand, as US data has proved generally unsupportive. The ISM Non-Manufacturing PMI, Trade Balance, Customer Credit and Continuing Jobless Claims figures all proved more dovish than forecast, offering further indications of slowdown within the domestic economy. Friday’s domestic Wholesale Inventories also failed to live up to expectations, as consumer demand appeared to be decelerating at a greater rate than previously assumed.
While slightly stale, the latest Federal Open Market Committee (FOMC) meeting minutes released on Thursday also weakened demand for the ailing ‘Buck’. Policymakers appeared unhappy with the level of domestic inflationary pressure, suggesting that a 2015 Fed interest rate increase could be off the table and encouraging a further surge in risk sentiment.
EUR/USD Exchange Rate Forecast: Euro Could Remain Dominant as US Dollar Hopes to Rally on Upcoming Inflation Data
There will be plenty of chances for both the Euro and US Dollar to strengthen throughout the coming week, with Consumer Price Index data for Germany, the Eurozone as a whole and the US particularly likely to provoke volatility. With the general emphasis placed on inflationary measures with regards to monetary policy decisions strong showings on any of these figures would be sure to see a surge in demand for the domestic currency.
Industrial Production for both Germany and the US, the ZEW economic surveys, US Advance Retail Sales and the University of Michigan Confidence Index for October will all be other key releases to watch over the coming days.