UPDATE
The US Dollar to Euro (USD/EUR) exchange rate declined by around -0.28% on Monday morning.
With trader focus set firmly on Wednesday’s Federal Open Market Committee meeting, the US Dollar softened versus most of its major peers. This is mainly due to speculation that the Fed won’t see fit to retire tired rhetoric with regards to rate revisions. Aiding the ‘Greenback’ (USD) declination was a situation where many Iranians capitalised on a favourable exchange rate; selling US assets to get a better deal on Iranian Rial.
The Euro, meanwhile, is trading relatively statically on Monday morning as traders await an announcement from the European Central Bank (ECB) with regards to the purchases made to fund quantitative easing.
The US Dollar to Euro (USD/EUR) exchange rate is currently trending in the region of 0.9492.
At the close of last week, the US Dollar to Euro (USD/EUR) exchange rate rallied by around 1.00%.
After enduring a significant declination over the past week, the US Dollar strengthened last Friday as a result of speculation the ‘Buck’ (USD) was oversold. With geopolitical tensions regarding Greece easing, however, dampened demand for safe-haven assets could see the US Dollar soften over the course of the week.
The shared currency is unlikely to be heavily impacted by domestic data. This is due to trader focus being dominated by ongoing proceedings in Greece and the early stages of quantitative easing.
US Dollar (USD) Exchange Rate Forecast to Fluctuate on Domestic Data
Given that the Federal Reserve has intimated that rate revision would be subject to domestic data results, every significant publication is likely to provoke Dollar movement. Therefore, the US Dollar has heightened potential to be subject to fluctuations over the coming week.
For those invested in the ‘Greenback’ (USD); Industrial Production, Manufacturing Production, NAHB Housing Market Index, Net Long-Term TIC Flows, Housing Starts, Building Permits, Mortgage Applications, initial Jobless Claims, Continuing Claims, Philadelphia Fed, Leading Indicators, Public Finances and Public Sector Net Borrowing will be of interest.
Perhaps the most significant publication will be the Federal Open Market Committee (FOMC) rate decision. Although very few people predict a change to the rate, if the FOMC drop rhetoric such as ‘patience’ the US Dollar is likely to rally.
Euro (EUR) Exchange Rate Forecast to Soften on QE
Domestic data is unlikely to have a significant impact on Euro volatility over the coming week. This is because trader focus will be dominated by divided opinion as to the effectiveness of quantitative easing. One of the biggest concerns is that QE will boost already strong economies, leaving smaller nations in the dark.
However, for those invested in the common currency; German Economic Sentiment, Eurozone Economic Sentiment, Eurozone Consumer Price Index and the European Central Bank (ECB) Economic Bulletin will be of importance.
Speeches from Federal Reserve officials will be closely scrutinised over the coming week with rate hawks pushing for an early benchmark interest rate hike.
The situation between Greece and Germany is on a knife edge and could turn sour. Should the relationship deteriorate further the Euro is likely to soften significantly amid fears of a Greek exit from the Eurozone.
At the close of last week, the Euro to US Dollar (EUR/USD) exchange rate was trending within the range of 1.0481 and 1.0635.