The Euro to US Dollar (EUR/USD) exchange rate ticked higher by around 0.26% on Wednesday afternoon.
Although Eurozone inflation data met with expectations, the shared currency slumped versus most of its currency rivals. This is due to Greek struggles weighing on investor confidence. With significant debt repayment deadlines approaching, many analysts have been surprised, and perhaps alarmed, that the Hellenic nation still refuses to bend to the will of creditors.
The US Dollar, meanwhile, is bearish as traders await the Federal Open Market Committee (FOMC) interest rate decision. Most experts predict that policymakers will take dovish stances given recent rocky ecostats and US Dollar overvaluation.
The Euro to US Dollar (EUR/USD) exchange rate is currently trending in the region of 1.1266.
Euro (EUR) Exchange Rate Forecast to Tick Higher against the ‘Buck’ (USD) despite Increasing Grexit Potential
Eurozone inflation data printed relatively positively on Wednesday. May’s Eurozone Consumer Price Index came in at 0.3% on the year and 0.2% on the month, meeting with median market expectations. In addition, Eurozone Core Consumer Prices came in at 0.9% in May –once again equalling the market consensus.
The positive data has not been particularly impactful, however, with the situation in Greece dominating trader focus. Many countries and institutions are now openly preparing for a Greek exit from the Eurozone in order to contain the fallout. A report from Greece’s central bank has warned of an ‘uncontrollable crisis’ if Athens can’t reach a bailout agreement before credit runs dry. ‘What we need today is a viable debt deal which will spare future generations burdens that we have no right to saddle them with,’ the report said. In order to achieve that, we have to seek a deal which will spread the burden evenly and which will not hurt wage earners and pensioners.’
It could be that the European Commission sees the fallout from a Grexit as far less damaging then making concessions that other Eurozone countries will feel is their right to emulate.
The Euro to US Dollar (EUR/USD) exchange rate dropped to a low of 1.1236 today.
US Dollar (USD) Exchange Rate Forecast to Trend Lower against the Single Currency ahead of the FOMC Decision
US economic data printed comparatively poorly on Wednesday, which has weighed on demand for the ‘Greenback’ (USD). MBA Mortgage Applications declined by -5.5% in the week ending June 12th. ‘Rising rates continue to create volatility in weekly mortgage applications activity. The 10-year Treasury hit 2.5 percent last week and our survey’s 30-year fixed rate of 4.22 percent is at its highest level since October 2014. The refinance index dropped to the lowest level since January 2015 as rates continued to increase,’ said Mike Fratantoni, MBA’s chief economist.
The North American asset is unlikely to make any significant gains ahead of the FOMC interest rate decision later this evening. Most expect policymakers to hold rates, but the accompanying statement from Federal Reserve Chair Janet Yellen will be closely scrutinised by traders. Many expect Yellen to give a dovish speech considering the International Monetary Fund (IMF) has warned about raising rates too early, economic data has produced mixed results, and the Dollar is significantly overvalued. Should they increase the cash rate, the Dollar will likely surge which could have serious ramifications for exports.
Euro to US Dollar (EUR/USD) Exchange Rate Forecast to Hold Losses ahead of FOMC Interest Rate Decision, Yellen Speech
As explained above, the ‘Greenback’ is unlikely to strengthen notably ahead of the FOMC decision and accompanying speech from Janet Yellen. Therefore, the Euro to US Dollar (EUR/USD) exchange rate is likely to hold gains for the remainder of Wednesday’s European session. Thursday’s ‘Cable’ position will likely be mostly dictated by the FOMC, although US Consumer Prices will be of significance and likely to provoke EUR/USD volatility.
The Euro to US Dollar (EUR/USD) exchange rate climbed to a high of 1.1292 today.