Euro to US Dollar (EUR/USD) Exchange Rate Knocked Lower by Eurozone and US Data
This week’s Eurozone data has been underwhelming so far, so investors have had little reason to keep buying the Euro (EUR) over the US Dollar besides general weakness in the US Dollar (USD).
Broad USD weakness has made it easier for EUR/USD to test highs recently. After opening this week at the level of 1.23 the pair touched a high of 1.24 on Monday. This was the best EUR/USD level in a month.
On Tuesday though, EUR/USD slipped back towards the level of 1.24. For now the pair is trending above the week’s opening levels, but further EUR/USD losses may be possible as the latest Eurozone inflation report was underwhelming.
This morning’s Eurozone inflation results from March met projections in most prints, but the final year-on-year figure only climbed to 1.3% rather than the projected 1.4%.
As a result, European Central Bank (ECB) interest rate hike bets remained low and investors found the Euro less appealing.
Euro (EUR) Exchange Rates Fail to Hold Best Levels as Eurozone Data Falls Short
Amid market concerns that the Eurozone economy is not strong enough to pressure the European Central Bank (ECB) to take a more hawkish stance on monetary policy any time soon, the past week’s data has done little to change that.
Tuesday’s Eurozone data was largely disappointing. Italy’s final March Consumer Price Index (CPI) results fell short in most major prints, coming in at 0.3% month-on-month and 0.8% year-on-year.
ZEW’s April economic sentiment survey results for Germany and the Eurozone were even more disappointing.
German current conditions fell from 90.7 to 87.9 while the key economic sentiment index worsened to -8.2, well below the expected -1.0. The overall Eurozone sentiment index fell from 13.4 to 1.9 and well below the forecast 7.3.
This followed last week’s mixed inflation stats from various Eurozone nations, as well as a relatively dovish meeting minutes report from the ECB.
US Dollar (USD) Exchange Rates Supported by US Data and Calming Markets
In recent weeks, the US Dollar (USD) has seen weak performance against many majors including the Euro (EUR). This has been due to wide concerns about the possibility of a US-China trade war, as well as geopolitical jitters between the US and Russia over Syria.
However, those concerns have taken a backseat so far this week and the US Dollar has strengthened slightly from its lows. The latest US data helped, with retail sales and building stats beating expectations so far.
US retail sales from March beat forecasts in Monday’s report. Monthly sales climbed to 0.6%, above the expected 0.4%, while the yearly print rose from 4.1% to 4.5%.
On Tuesday, US building permits and housing starts both beat forecasts in March. Industrial production slipped slightly year-on-year, but did beat expectations month-on-month in March.
With strong fundamentals in US data and geopolitical risks being perceived as fading slightly, the US Dollar could continue to become more appealing.
Euro to US Dollar Forecast: Central Bank Speculation to Drive EUR/USD
Following the publication of Eurozone inflation data on Wednesday, the Euro to US Dollar (EUR/USD) exchange rate could be driven by central bank speculation and political developments for the remainder of the week.
Investors will likely become even more doubtful that the European Central Bank (ECB) is preparing to take a more hawkish tone on Eurozone monetary policy any time soon.
This could leave the Euro (EUR) weaker and potentially help the US Dollar (USD) to make gains against the shared currency in the coming days.
Fresh economic data could also influence EUR/USD in the coming days. Friday will see the publication of the Eurozone’s April consumer confidence projection for April.
As for the US Dollar, its strength could be tested if US political jitters worsen again, or if upcoming speeches from Federal Reserve officials are surprisingly cautious.
However, as the Federal Reserve was optimistic in its most recent meeting minutes, hawkishness from Fed officials could cause Euro to US Dollar (EUR/USD) exchange rate weakness in the coming days.
