The Euro (EUR) tumbled to a fresh 14-month low against the US Dollar (USD) on Wednesday following the publication of strong new US home sales data and the release of disappointing data out of Germany.
Earlier in the session the Euro fell after data out of Germany showed that business confidence in the Eurozone’s largest economy fell for a fifth month straight in September.
The Ifo economic institute’s business climate index fell to 104.7 from 106.3 in August. It was the lowest level since April 2013 and much weaker than economists’ forecasts for 105.7.
Comments made by European Central Bank (ECB) President Mario Draghi also put pressure on the single currency after he said that the bank would continue to do whatever it takes to tackle the threat of deflation taking root in the region.
‘Monetary policy will remain accommodating for a long time and I can tell you that the Governing Council is unanimous in committing itself to using the tools at its disposal to bring inflation back to just under 2%. Interest rates will remain low because they can’t get much lower,’ Draghi said.
His comments also increased speculation that the central bank is edging closer to introduce a quantitative easing programme.
As the session progressed and the US released its own data the EUR/USD tumbled to 1.27 for the first time in 14 months.
Data released by the Washington based Commerce Department showed that the number of US new home sales surged by 18% in August. Sales increased to 504,000 units, beating expectations for a gain of 4.4% or 430,000 units. The increase was the second consecutive gain and was the highest level recorded since May 2008.
The strong data eased concerns that the USA’s housing market is slowing down.
Euro to US Dollar Exchange Rate forecast to fall further
The Euro is expected to continue to trend lower against the US Dollar as doubts over the strength of the Eurozone economy continue to weigh upon sentiment and as economic data out of the world’s largest economy continues to support speculation that the Federal Reserve is getting closer to raising interest rates.
‘The Euro is going to continue to drift lower. As a consequence of a weaker Germany, by definition the Eurozone is appreciably weaker too, and it just puts a further onus on the ECB,’ said Jeremy Stretch, head of foreign exchange strategy at Canadian Imperial Bank of Commerce.
Euro Exchange Rate News:
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