Euro to US Dollar (EUR/USD) Exchange Rate in a Narrow Field Ahead of ECB Rate Decision
The Euro to US Dollar exchange rate has steadily strengthened over the course of Wednesday as traders await the Federal Reserve Beige Book publication due later in the evening.
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The Euro had a further boost against the US Dollar on Wednesday afternoon after US Mortgage applications showed minimal growth.
Despite a distinct lack of influential, market moving data on Tuesday the Euro made gains against many of its major rivals.
This was most likely due to the fact that economists have changed their mind regarding the upcoming European Central Bank interest rate decision, having originally believed that the ECB would introduce a major stimulus package.
Now, it seems, most believe that the ECB will not only maintain the interest rate but allow the current stimulus more time to affect changes.
Those invested in ‘Greenback’ (USD) would have been pleased with the performance of the US Dollar on Tuesday.
Having made steady gains across the board in light of its safe-haven qualities the ‘Buck’ (USD) was bolstered by a particularly good manufacturing print.
The ISM Manufacturing Index was forecast to fall slightly from 57.1 to 57.0, but the actual data showed a positive increase to 59.0. The result was to see demand for the US Dollar rocket.
The Euro to US Dollar exchange rate has hit a low today of 1.3120.
Wednesday has seen a complete reversal and the Euro has strengthened considerably against the US Dollar.
In spite of the fact that Eurozone Retail Sales fell below forecast levels and there were a total of seven negative revisions to European data; the Euro has made steady gains versus nearly all of its major peers.
This could be attributed to the continued speculation of unchanged European Central Bank monetary policy.
Euro bullishness may also be as the result of easing geopolitical tension between Russia and Ukraine.
The Ukrainian President Petro Poroshenko announced on Wednesday that he and the Russian President, Vladimir Putin, have agreed to a ceasefire in Eastern Ukraine.
Poroshenko wrote on Twitter: ‘After speaking by telephone to the Russian president we reached an agreement on achieving a ceasefire in Donbass. Glory to Ukraine!’
However, it seems that this is perhaps an exaggeration as Shaun Walker, writing for The Guardian, explains; ‘Shortly after Poroshenko’s announcement RIA Novosti quoted Putin’s spokesman, Dmitry Peskov, as saying that the two leaders had not agreed on a ceasefire, as Russia is not party to the conflict, but had discussed how to end the conflict’.
Demand for the ‘Greenback’ waned considerably on Wednesday which might also be the result of the easing geopolitical tensions described above.
It is also possible that the rush to buy the US Dollar after Tuesday’s positive manufacturing data saw traders overestimate the effect of that data, and have sold their excess ‘Bucks’.
It is also very possible that investors are holding off from purchasing the ‘Greenback’ ahead of tonight’s Federal Reserve Beige Book publication. Action Economics explains the reason for this; ‘The Federal Reserve’s Beige Book snapshot of economic health in each of the central bank’s districts will take on added importance the closer the Fed gets to ending its extraordinary monetary policy and normalizing interest rates’.
Thursday’s Forecast for the Euro to US Dollar Exchange Rate
Of particular importance, in terms of European economic standing and Euro movement, will be Thursday’s European Central Bank interest rate decision.
Having originally believed that the ECB would introduce quantitative easing to boost the overall economic standing, traders have now lent towards the notion that there won’t be any major monetary policy changes announced.
It is widely accepted that it would be incredibly unlikely that the ECB will alter the current interest rate at 0.15%.
The proceeding press conference will be likely to influence Euro movement, especially if ECB President Mario Draghi tries to talk down the single currency.
Those invested in the Euro will also be interested to see the results from German Factory Orders, the German Construction PMI, the Eurozone Retail PMI, the German Retail PMI, the ECB Deposit Facility Rate and the ECB Marginal Lending Facility.
There are several US economic data releases on Thursday of varied importance.
Perhaps the most influential of these will be the ISM Non-Manufacturing Composite which is forecast to drop from 58.7 to 57, although those invested in the ‘Buck’ will be hoping that it will emulate the manufacturing data seen on Tuesday.
The US labour market data will be of significance, particularly as it is so close to the Federal Reserve’s bank rate decision.
Employment Change is forecast to drop from 218,000 to 210,000. Continuing Claims is also expected to fall, but Initial Jobless Claims is forecast to rise from 298,000 to 300,000.
The Euro to US Dollar exchange rate is currently trending in the region of 1.3147.
In spite of a mixed-bag of European domestic data publications on Thursday morning the Euro to US Dollar exchange rate has experienced minimal movement. This is likely to be the result of traders holding off until the publication of the European Central Bank interest rate decision, and the following press conference.
German Factory Orders eclipsed the forecast figure of 1.1%, printing at a surprising 4.9%. However, the German Construction PMI dropped from the previous score of 48.2 to 47.7, the Eurozone Retail PMI fell from 47.6 to 45.8 and the German Retail PMI also declined from 52.1 to 49.4.