Euro to US Dollar (EUR/USD) Exchange Rate Softening Amid Geo-Political Russian Tensions
Wednesday has brought an eight-month low for the Euro to US Dollar (EUR/USD) exchange rate currently trading at 1.3466. Wednesday’s session has brought highs of 1.3473 whilst dipping to lows of 1.3453.
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The European Central Bank (ECB) is considered by economists to need the use of further unconventional methods in an attempt to aid the Eurozone recovery; in comparison to other currencies such as the US Dollar (USD) and the Pound (GBP) where interest rate hikes remain consistently discussed as their economies strengthen.
BNP Paribas commented: ‘The gradual widening in interest rate differentials in favour of the US also adds to the argument that EUR/USD has scope to fall further as we target 1.32 on our trade recommendation.’
The Eurozone however has produced a string of disappointing data, lending to the US Dollar to alter the EUR/USD pairing in any significant way.
Thursday will see the release of German and French Manufacturing, Composite and Services PMI data which are all forecast to fall unfavourably in July for the Eurozone. However, if by chance the data surprises the Euro could see some support against other currency majors.
The US Dollar will be influenced by Initial Jobless Claims and Continuing Claims figures released on Thursday which could cause some fluctuation in the EUR/USD exchange rate. Chairwoman for the Federal Reserve, Janet Yellen, recently took a more hawkish tone, stating that although she was firm that interest rates would not be rising in the near future, positive employment data would fuel any increases.
However the Initial Jobless Claims figures are expected to rise to 310K, in comparison to the previous 302K. Furthermore the Continuing Claims figures are expected to be higher at 2510K, from the former 2507K.
However the Euro could also soften if geo-political tensions continue with the probability of Russia being placed under heavy sanctions.
Morgan Stanley currency expert, Ian Stannard stated: ‘There is quite broad-based pressure building on the Euro and there are a number of factors driving that. Europe is directly exposed to Russia by trade—Germany in particular—so sanctions could potentially have a negative impact on the Euro.’
With the Eurozone recovery still fragile, the Euro has fallen slightly from its former, higher position, however, the ECB will need to introduce more measures in order to ensure a stable Eurozone recovery, whilst the US Dollar appears, for now, to be in a more stable position to compete in the currency market. The USD to EUR exchange rate is currently residing at 0.7424.