Euro (EUR) Exchange Rate Forecast to Strengthen as Economic Sentiment Rises
The Euro to Pound Sterling (EUR/GBP) exchange rate rallied by around 0.90% on Tuesday afternoon.
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The Euro to US Dollar (EUR/USD) exchange rate advanced by around 0.30%.
In response to positive comments made by European Central Bank (ECB) President Mario Draghi, the single currency advanced versus the majority of its most traded currency rivals. Additional appreciation is as a result of mostly positive domestic data.
The Euro to Pound Sterling (EUR/GBP) exchange rate is currently trending in the region of 0.7194.
The Euro to US Dollar (EUR/USD) exchange rate is currently trending in the region of 1.0603.
Euro (EUR) Exchange Rate Advances after Hawkish Draghi Comments
On Monday ECB President Mario Draghi gave a speech in Frankfurt. He suggested that quantitative easing in the Eurozone is already having a positive effect at this early stage which is evidenced by changes in the bonds market. Furthermore, Draghi suggested that the Eurozone is walking the path to recovery, albeit somewhat slowly.
‘Most indicators suggest a sustained recovery is taking hold,’ Mr. Draghi said. ‘Confidence among firms and consumers is rising. Growth forecasts have been revised upwards. And bank lending is improving on both the demand and supply sides.’
However, there are still lingering uncertainties regarding the ECB’s ability to source the requisite bonds to finance the long-term injection of liquidity in the Eurozone. ‘It is pretty clear that the programme has been put into place as soon as possible, before all the operational details had been settled,’ said Peter Chatwell, a strategist at Mizuho. ‘This uncertainty means our funding markets are not operating as normal.’
‘This expensiveness in term repos shows how unwilling Bund holders are to depart from their collateral for more than a few days or weeks,’ said JPMorgan analyst Nikolaos Panigirtzoglou.
Euro (EUR) Exchange Rate Forecast to Fluctuate
Given that quantitative easing is designed to devalue a currency, and with divided opinion as to the effectiveness of quantitative easing in the long-term, there is heightened potential for the Euro to fluctuate over the coming weeks. The ECB will be hoping to see the single currency slide irrespectively of domestic data results in order to foster economic recovery.
Additionally, ongoing tensions with Greece and the lingering potential for a Greek exit from the Eurozone are weighing on investor confidence.
The Euro to Pound Sterling (EUR/GBP) exchange rate was trading within the region of 0.7116 to 0.7216.
The Euro to US Dollar (EUR/USD) exchange rate was trading within the range of 1.0548 and 1.0651.