Euro to US Dollar (EUR/USD) Exchange Rate Forecast: Could ECB Announcement Surprise? Markets Uncertain
The Euro to US Dollar (EUR/USD) exchange rate remained in a narrow range on Thursday before the European Central Bank (ECB) announces it’s plans for monetary stimulus and potentially quantitative easing (QE).
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Earlier… The Euro to US Dollar (EUR/USD) exchange rate continued to trend higher during the second half of Wednesday’s trading amid heightened European Central Bank (ECB) speculation.
With markets trying to anticipate the central bank’s next move, trading has been rather choppy.
Currency strategist Peter Gorra commented: ‘It’s a jumpy market where I think every comment is just going to push markets one way or the other.’
Earlier… The Euro to US Dollar (EUR/USD) exchange rate recorded gains in Wednesday’s session as investors anticipate action from the European Central Bank (ECB) on Thursday.
Furthermore, Germany’s Economic Sentiment Survey grew from 34.9 to 48.4 in January while the Eurozone figure also leapt from 31.8 to 45.2.
The Euro to US Dollar (EUR/USD) exchange rate began Tuesday’s session trending lower after German Producer Prices contracted in December.
Prices contracted by -0.7% in the month of December dragging the annual figure down to -1.7%.
ZEW’s Eurozone and German economic sentiment survey’s are still to come.
On Monday… The Euro to US Dollar (EUR/USD) exchange rate has clawed back some of last week’s losses accredited to the Swiss National Bank’s (SNB) surprise announcement.
The SNB revealed that it had cut the tie between the Euro and the Swiss Franc (EUR/CHF) which had been in place since 2011. The move pressured the Euro lower as speculation that the European Central Bank (ECB) may be planning a big move at this week’s meeting increased.
However, a conflict of opinions has surfaced in the run-up to the announcement, with many economists expecting minimal action from the central bank on Thursday. The general consensus is that the ECB needs to implement extensive measures immediately if it hopes to drag the Eurozone out of disinflation and stimulate growth.
French President Announces QE – Euro (EUR) Exchange Rate Remains Steady
The opinions may be pushed aside after French President Francois Hollande announced that the European Central Bank would be embarking on a period of QE on Thursday.
Hollande stated: ‘On Thursday, the ECB will take the decision to buy sovereign debt.’
In addition to the ECB woes, Greece will hold its general election this week. The vote could see a political party that wishes to renegotiate the Greek austerity programme gain power —an event that has the potential to result in a Greek exit from the Eurozone (Grexit).
Industry expert Ian Bremmer commented: ‘The politics of Europe is so much more problematic even though the economics look better. Everywhere you look politically, bottom up, inside out, outside in, Europe is bad this year.’
Furthermore, economists have suggested that if Greece leaves, it could pave the way for other nations to consider an exit from the Eurozone and the 16-year old Euro. Portugal is scheduled to hold an election in October and Spain’s high unemployment rate and vote toward the end of the year are both causing concern.
Morgan Stanley economist Elga Bartsch stated: ‘These elections could show a shift with respect to European integration as the electoral balance between the centre-right and the centre-left is abandoned in favour of new protest parties.’
Meanwhile, the US Dollar has been trending higher against other majors after last week’s mixed bag of data. However, University of Michigan Confidence figures shot up from 93.6 to 98.2 in January—the highest level since 2004.
Industry expert Gary Langer commented: ‘Views of the national economy have advanced the most dramatically. The advance in consumer sentiment mirrors other positive economic developments, including strong GDP growth and an expanding job market.’
Euro to US Dollar (EUR/USD) Exchange Rate Forecast
The Euro to US Dollar (EUR/USD) exchange rate could fluctuate on several occasions this week due to both the publication of influential data and the ECB’s monetary policy announcement on Thursday 22nd.
Both Germany and the Eurozone’s ZEW Economic Sentiment Survey’s are published on Tuesday and could offer the Euro some support if they climb as economists have forecast.
US Mortgage Applications, Building Permits and Housing Starts are all out on Wednesday and could impact US Dollar trading moderately.
ECB President Mario Draghi will make statements on Thursday as he announces the central bank’s monetary policy decision, an event likely to send ripples through the market.
The Euro to US Dollar (EUR/USD) exchange rate is trending in the region of 1.1609. The US Dollar to Euro (USD/EUR) exchange rate is hovering at 0.8617.