While Euro movement was limited on Monday, the EUR/USD pairing was able to strengthen as a result of US concerns.
The US Dollar posted modest but widespread declines as investors speculated on the outcome of the Federal Open Market Committee’s policy meeting and focused on upcoming US growth and employment figures.
The growth data is expected to show that the US economy expanded by 1.2 per cent in the first quarter of 2014, down from expansion of 2.6 per cent in the final three months of 2013.
Although economists have forecast that Friday’s unemployment report will detail a decline in the nation’s unemployment rate, from 6.7 to 6.6, the FOMC is still expected to emphasise the necessity of keeping interest rates at record lows while slowly reigning in stimulus.
If the rhetoric adopted by the central bank is dovish, US Dollar declines may occur.
The fact that a flurry of merger activity involved German company Bayer AG also helped the Euro advance on its US counterpart.
However, the Euro could also feel the heat this week if the Eurozone’s inflation report falls short of forecasts.
If the Eurozone’s consumer price index shows a smaller-than-expected price increase the Bank of England could be pushed into altering fiscal policy at its next meeting and the Euro could fall against its currency counterparts.
While there is a stream of economic data for the Eurozone due for publication over the course of the week, these inflation figures really are key.
According to economist Frederik Ducrozet; ‘If April inflation undershoots expectations, it would strengthen the case for early ECB action in May. The first step would be a cut in the refinancing rate and possibly a liquidity-easing measure. For QE, inflation needs to remain stable without rebounding.’
In the hours ahead the Euro to US Dollar exchange rate could experience additional movement as a result of a Ukraine inspired risk-off environment. With the US and EU imposing a fresh set of sanctions on Russia, any repercussions could have a serious impact on higher-risk and emerging market currencies.
US pending home sales data will also be of interest ahead of tomorrow’s German/Eurozone consumer confidence figures and German inflation data.
Euro (EUR) Exchange Rates
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
Euro,
,US Dollar,1.3864,
Euro,,British Pound,0.8229,
Euro,,Australian Dollar,1.4938,
Euro,,New Zealand Dollar,1.6219,
Euro,,Canadian Dollar,1.5275,
[/table]
