Euro (EUR) Exchange Rate Drop Forecast after German IFO Figures Disappoint
The Euro (EUR) has witnessed a disappointing end to the week by way of data, currently trading down against the British Pound (GBP) at 0.7921. The Euro has reached session highs of 0.7934, and lows of 0.7911 so far.
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The Euro is presently situated amid heightening geopolitical tensions, which are causing some concern over the Eurozone’s recovery. The Euro is likely to see fluctuations as sanctions against Russia are put in place, which could cause severe volatility for the Single Currency.
Friday has seen Eurozone data fail to meet economists’ expectations, which could cause the Euro to lose any gains made from Thursday’s highly surprising PMI data.
German IFO Business Climate figures only attained 108.0, bypassing forecasts of 109.4; whilst German IFO Current Assessment figures only reached 112.9, rather than the 114.5 that was predicted.
Furthermore the German IFO Expectations faltered at 103.4, despite being forecast to reach 104.4.
President of the IFO Hans-Werner Sinn has commented: ‘Geopolitical tensions are taking their toll on the German economy.’
Such unfavourable data caused the Euro to dip to lows against the US Dollar and could encourage the Euro back into the eight-month-lows it clawed out of yesterday.
An expert in the field Naeem Aslam commented: ‘Traders were net short on EUR/USD before the data and this reading has pushed the Euro further lower.’
One small pocket of optimism however can be seen in the German Consumer Confidence figures which rose to 9.0 in August, bypassing the 8.9 forecast.
The EUR/USD relationship has been shaken in recent months, however the US of late has been publishing more favourable data showing the US economy to be mending at a steady pace. Meanwhile the Chairwoman for the Federal Reserve—Janet Yellen—has been offering support for the US Dollar, and has made slightly hawkish remarks in recent speeches.
Spokesperson for Rabobank Jane Foley suggested: ‘Really, one could feel sentiment among the dealers turn against the Euro sometime in May and my feeling is that may finally now be coming through. I did have $1.35 for the end of this year, and obviously we have broken through that now. If it is still there in two weeks then I will think about revising that down a little.’
For now the Euro remains in a precarious situation as the outcome of Russian sanctions is still yet to be seen, however, with such weak data on Friday morning, the Euro is likely to make no other movement than down.
The USD to EUR exchange rate rests at 0.7439, whilst the Pound trades up against the Single Currency at 1.2616.