EUR/USD Exchange Rate hits Fresh 2-Year Low on Better-than-Forecast US Labour Data
Despite having softened a little amid anxieties of over-purchase, the US Dollar has clawed back the losses after Friday’s economic data printed much better-than-expected. A healthy set of European domestic data on Friday hasn’t been enough to offset the bullish run of the ‘Buck’ (USD).
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On Thursday the European Central Bank made their rate decision for October opting to maintain the record-low 0.05%. Initially traders were pleased despite the ECB choosing to adopt further stimulus initiatives in the form of the purchase of asset-backed securities and covered bonds. ECB President Mario Draghi stated that this would ‘generate positive spillovers to other markets’. Perhaps investors were looking for any small positive note; and the fact that they didn’t resort to quantitative easing was enough to see the Euro appreciate a little.
Thursday’s US data was generally positive but the US Dollar softened a little. This was because traders feared that they had overdone the purchase of the ‘Greenback’ (USD) amid speculation that the Federal Reserve will hike rates early 2015. The US Dollar softened as traders pared the gains arguing that the months economic data didn’t necessarily warrant the bullish run.
The Euro to US Dollar exchange rate has hit a low today of 1.2526.
Friday’s European data has been relatively positive. The German Composite PMI improved upon the market consensus having risen from 54 to 54.1. Also the German Services PMI eclipsed the median market forecast with the actual result increasing from 55.4 to 55.7. Perhaps more crucially Eurozone Retail Sales showed a vast improvement. Having been forecast to rise from 0.5% to 0.7% the actual result jumped to 1.9%.
This positive European data had been enough to see the single currency appreciate against the majority of its most traded currency competitors in the early part of the London session. However those gains were short-lived after protestors took to the streets in Naples. ECB President Mario Draghi seemed to be stung as the bank became the subject of protests. Protestors held banners declaring ‘block the ECB’ and ‘job insecurity, poverty, unemployment, speculation. Free us from the ECB’. Draghi responded by saying; ‘I think the description of the ECB here as the guilty actor needs to be corrected. Go back and ask yourself how you were two and a half, three years ago. The financial system seemed on the verge of collapsing’.
US data on Friday has printed particularly positively aiding the ‘Greenback’ to claw back the losses from over-purchase. Change in Non-Farm Payrolls was forecast to increase from 180, 000 to 215, 000, but the actual result showed a huge increase to 248, 000. Also the Unemployment Rate eclipsed the market consensus of a continuation of the previous figure of 6.1%, with the actual data showing a positive declination to 5.9%. This better-than-expected US labour market data will add a tremendous amount of pressure on the Federal Reserve to normalise monetary policy as soon as possible.
Forecast for the Euro to US Dollar Exchange Rate
With sentiment towards the single currency leaning towards the negative, and US data proving to compliment speculations of a rate increase; it is very likely that the Euro to US Dollar exchange rate will continue to depreciate over the course of the weekend.