The Euro to US Dollar (EUR/USD) exchange rate softened by around -0.34% on Wednesday morning.
With geopolitical tensions in Greece showing no sign of a comfortable resolution, the single currency edged lower versus many of its major peers on Wednesday. The European Central Bank (ECB) rate decision, due later on Wednesday, is unlikely to have a significant impact given that few expect the institution to make any changes with quantitative easing still in its infancy.
The US Dollar, meanwhile, strengthened versus many of its major peers after Tuesday’s declination was seen as overdone. However, with continued concern regarding Dollar overvaluation, there is a strong possibility that the US Dollar will resume declination in the long-term.
The Euro to US Dollar (EUR/USD) exchange rate is currently trending in the region of 1.0607.
Yesterday…
The Euro to US Dollar (EUR/USD) exchange rate rallied by around 1.13% on Tuesday afternoon.
The single currency strengthened versus the majority of its most traded currency rivals after a report from the European Central Bank (ECB) indicated that quantitative easing was already having a positive effect on European banks’ willingness to lend. Additional appreciation can be attributed to a report from the International Monetary Fund (IMF) which stated that the strength of the US Dollar was aiding the Eurozone’s economic recovery. The ongoing geopolitics and frayed relationship between Greece and Eurozone officials, however, slowed the single currency appreciation.
The US Dollar, meanwhile, softened versus the majority of its most traded currency competitors in response to disappointing domestic data. Additionally, fears that the high value of the US Dollar will be a stumbling block for economic recovery and eventual benchmark rate increases has had a detrimental effect on investor confidence.
The Euro to US Dollar (EUR/USD) exchange rate is currently trending in the region of 1.0697.
Euro (EUR) Exchange Rate Edges Higher on ECB Confidence
Although the situation in Greece is far from resolution, investor focus moved away from geopolitics for the first time in many weeks after the European Central Bank (ECB) released a positive report. The Bank Lending Survey suggested that, even at this early stage, quantitative easing is having a positive effect on banks’ willingness to lend.
‘No doubt ECB President (Mario) Draghi will refer to these results tomorrow as evidence that QE is already having a beneficial effect on the Eurozone’s credit conditions,’ said ING analyst Teunis Brosens in a note.
Additional Euro appreciation can be attributed to a report from the IMF which stated that the strength of the US Dollar and the weakness of the single currency would see the Eurozone economy strengthen by 1.5% in 2015.
The Euro to US Dollar (EUR/USD) exchange rate dropped to a low of 1.0529 today.
US Dollar (USD) Exchange Rate Dives on Overvaluation Concern
The IMF report, mentioned above, warned that the US economy could see cool growth with the Dollar continuing to strengthen. This has also been a concern flagged by Federal Reserve policymakers as they flirt with the timing of a fractional lending rate increase. This caused the US Dollar to soften versus the majority of its most traded currency competitors.
Disappointing domestic data also lubricated the ‘Greenback’ slide, with particular reference to sales data. Advance Retail Sales was forecast to gain by 1.1% in March, but the actual result only managed growth of 0.9%. The cool sales growth has been linked to unseasonably cold weather.
Euro to US Dollar (EUR/USD) Exchange Rate Forecast to Hold Gains
Despite the fact that tensions between Greece and Eurogroup members are hindering investor confidence, the large advance should see the Euro to US Dollar (EUR/USD) exchange rate hold gains for the remainder of the European session.
Wednesday ought to see heightened EUR/USD volatility with the ECB interest rate decision and several influential US data publications due for release.
The Euro to US Dollar (EUR/USD) exchange rate climbed to a high of 1.0707 today.