The Euro to USD exchange rate made its biggest drop in three-weeks on Monday as comments made by European Central Bank policy makers continued to weigh and as US retail sales figures came in stronger-than-expected.
The single currency remained under heavy pressure from comments made over the weekend by ECB policy makers and ECB President Mario Draghi who said that further appreciation of the Euro would trigger the implementation of new monetary stimulus measures.
Also weighing on the Euro was the deteriorating situation in Ukraine. The USA and its Allies are threatening to impose more sanctions against Moscow if Russia continues to encroach on Ukrainian territory.
“Draghi’s comment may be arresting the Euro appreciation for now but is unlikely to weaken it unless he takes action. The situation in Ukraine has probably deteriorated beyond what the market was expecting and that’s driving safe-haven currencies such as the Yen, the Franc, and the US Dollar higher,” said the head of G-10 strategy at Bank of America Merill Lynch.
The US Dollar strengthened after official data showed that retail sales in the USA rose by 1.1% in March, better than the 0.8% rise expected by economists. The figure was the biggest increase since 2012. Sales for February were also revised upwards from the previous figure of 0.3% to 0.7%. Improving weather and pent up demand following the harsh winter was thought to be the main driver for the sharp rise.
If the rest of the weeks US economic data comes in strongly then we can expect the ‘Greenback’ to strengthen further against the Euro and other peers. Positive data will make it more likely that the Fed will continue to taper its monetary easing programme and could increase calls for a rise in interest rates.
Current Euro Exchange Rates
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