The Euro to US Dollar (EUR/USD) exchange rate had a solid week as it strengthened to its best level in 10-weeks on Friday as a run of weaker-than-forecast data releases out of the USA caused investors to raise their bets that the Federal Reserve will not raise interest rates until later in the year.
The Euro to US Dollar (EUR/USD) Exchange Rate Hit a Weekly High Of 1.1275
The main drag on the US Dollar occurred on Wednesday as Gross Domestic (GDP) Product data out of the world’s largest economy shocked the markets by coming in well below expectations. The data showed that GDP expanded at an annualised rate of just 0.2% in the first quarter of 2015. The rise was well below the 2.2% increase seen in the final quarter of 2014 and was worse than economist expectations.
The US Dollar was then weakened further as the week progressed as the Federal Reserve left interest rates unchanged at 0.25% and delivered a rather dovish policy statement. The currency received a slight reprieve on Thursday as a report showed that the number of Americans filing for unemployment benefits fell to the lowest level in 15-years.
As the week ended, the US Dollar weakened against the Euro as the May Day holiday led to thin trading. Concerns that the recent run of soft US data was a result of more than just winter weather damaged sentiment towards the currency.
‘Weak US data, a bounce in oil prices and a pick-up in European growth…all weighed on positioning and the fallout has been seen in higher Bunds yields, a stronger Euro, a weaker US Dollar and bounce in the commodity-currency bloc. Now we are back to waiting to see if the US economic slowdown will reverse in the coming months,’ said an economist from Societe Generale.
Looking ahead to next week the main movers for the EUR/USD exchange will be Tuesday’s US balance of trade and ISM non-manufacturing reports. Wednesday’s ADP employment change report will also be a major influence. Friday will also see the release of the latest US Non Farm payrolls and unemployment data. If those figures disappoint then we can expect the ‘Greenback’ to continue to weaken against the Euro and other peers.
The Euro meanwhile will likely find support if the latest data out of the Eurozone continues to come in positively.
The Euro could also receive support if a deal looks likely between Greece and its creditors.
Geopolitical events could influence the EUR/USD exchange rate. If the conflicts in the Middle East or Ukraine worsen then demand for safer assets will increase.
Eurozone retail sales and PMI data due for release on Wednesday will also impact the EUR/USD exchange rate.