Euro (EUR) Exchange Rate Steady after ECB Stimulus Hints
After hitting a fresh 17-month low against the British Pound and struggling against the US Dollar last week, the Euro exchange rate came off recent lows on Tuesday.
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However, the common currency is still trending in a weaker position as a result of intensifying European Central Bank stimulus speculation.
Last week’s lacklustre German confidence reports put the Euro on the back foot before the weekend, and the asset came under additional pressure as ECB President Mario Draghi added fuel to the fire.
Draghi asserted that low inflation in the currency bloc is a major concern and that the central bank is prepared to take pre-emptive action in order to protect the region from the adverse impacts of deflation.
While speaking in Portugal Draghi noted; ‘To the extent that developments in the exchange rate, money or capital markets results in an unwarranted tightening of monetary and financial conditions, this would require an adjustment of our conventional instruments. At the other end of the spectrum would be a too prolonged downward departure of inflation and/or inflation expectations from our projected baseline scenario… This would call for a more expansionary stance, which would be the context for a broad-based asset purchase programme.’
While the US and UK national holidays restrained currency market movement on Monday, the Euro clawed back ground as investors engaged in a bit of profit taking and weakened Sterling in the process.
The US Dollar also came under pressure of its own as investors bet that mixed economic data for the US will prevent the Federal Reserve from introducing an interest rate increase in the near future.
The ‘Greenback’ eased lower ahead of the release of US durable goods orders data.
The orders report is expected to show a 0.7 per cent decline in April.
Today’s US Markit PMI and US consumer confidence report could have an additional impact on the EUR/GBP exchange rate.
Tomorrow volatility in the GBP/EUR pairing may occur as the result of UK CBI reported sales data, although movement will more likely be generated by German employment figures and final Eurozone consumer confidence measures.
If the German economy didn’t see the 15,000 person decline in unemployed forecast by economists, the Euro could suffer.
The German unemployment rate is expected to have held at 6.7 per cent in May.
The Eurozone’s consumer confidence index is believed to have come in at 7.1 per cent, as previously projected.
Currently the Euro is trading against the British Pound in the region of 0.8108 and is trading against the US Dollar in the region of 1.3656.