The US Dollar to Euro (USD/EUR) exchange rate rallied by around 0.64% on Wednesday morning. The US Dollar to Pound Sterling (USD/GBP) exchange rate strengthened by around 0.37%.
After the International Monetary Fund (IMF) released a report which warned that the high value of the US Dollar could offset the US economic recovery, the ‘Greenback’ (USD) declined versus the majority of its most traded currency rivals. However, with traders fearing the declination was overdone, the Dollar recovered some of those losses.
The shared currency, meanwhile, softened versus the majority of its most traded currency competitors on Wednesday morning. This can be attributed to dampened investor confidence as many expect Greece to default on forthcoming loan repayments. The European Central Bank (ECB) rate decision, due later on Wednesday, is unlikely to have a significant impact with very few expecting any changes.
The Pound Sterling edged lower versus most of its major rivals as political uncertainties stymie traders appetite for investment. A complete absence of domestic data is also aiding the slide with nothing to curb the downtrend.
The US Dollar to Euro (USD/EUR) exchange rate is currently trending in the region of 0.9449.
The US Dollar to Pound Sterling (USD/GBP) exchange rate is currently trending in the region of 0.6794.
US Dollar (USD) Exchange Rate Gains on Market Sentiment
Tuesday saw the US Dollar decline significantly as a result of retail sales data missing estimates and the IMF report discussed above. However, Wednesday has seen a ‘Greenback’ recovery as traders fear the losses were unjustified. The sales data, although missing estimates due to unforeseen weather issues, still registered growth.
The US Dollar has also seen heightened demand thanks to its safe-haven status. The ongoing geopolitical tensions in Europe are continuing to weigh on market sentiment. Additionally, China’s less-than-ideal economic data results saw dampened trader risk-appetite.
Euro (EUR) Exchange Rate Softens as Economists Expect Athens to Default on Loan Payments
European economic data has had minimal impact on the single currency on Wednesday as traders await the ECB interest rate decision. Although very few expect any significant changes with quantitative easing still very much in its infancy, there is a very slight possibility that ECB President Mario Draghi will consider reducing the length of QE as it seems to have had a very positive effect already.
With most economists expecting Greece to default on loan repayments unless Athens can acquire the financial aid it so desperately needs, the April 24th cut-off-point to produce acceptable reforms is being described as make-or-break.
Greek government officials have reiterated their confidence that Greece will secure the funds. ‘I can assure you we are working flat out for the good scenario,’ said deputy foreign minister Euclid Tsakalotos. ‘I am absolutely confident an agreement will be reached on 24 April. Deals are always done five or three or one minute before midnight, it’s not unusual that they should go right to the brink.’
Pound Sterling (GBP) Exchange Rate Declines on Political Unknowns
With a complete absence of domestic data to provoke volatility, the Pound softened versus many of its major peers. The declination can be attributed to ongoing political uncertainties as May’s general election approaches.
Thus far, opinion polls have given overwhelmingly different results. One thing is for certain, however, there is definitely no clear majority for any party at this stage. This is weighing heavily on investor confidence because of the very real possibility of a complete policy overhaul. A hung parliament and a new coalition could see Britain exit the European Union which will have an enormous impact on the currency market, although most are unsure as to how it may impact.
US Dollar to Euro (USD/EUR) and Pound Sterling (USD/GBP) Exchange Rates Forecast to Hold Gains
Although the IMF warned that an overvalued US Dollar could spell disaster for the US economy, traders are unlikely to heed such warnings. Provided domestic data prints reasonably positively, the US Dollar to Euro (USD/EUR) and Pound Sterling (USD/GBP) exchange rates will hold gains for the remainder of Wednesday’s European session.
Thursday’s US jobs data is likely to be significant. With the Federal Reserve stating that rate hikes would be subject to data results, with particular reference to the labour market, the publications are likely to have a significant impact on US Dollar movement.
The US Dollar to Euro (USD/EUR) exchange rate was trending within the parameters of 0.9376 to 0.9456.
The US Dollar to Pound Sterling (USD/GBP) exchange rate was trending within the range of 0.6765 to 0.6799.
