EUR/USD Exchange Rate Hits Fresh Yearly Low on Fading German Consumer Confidence
A succession of negative German data has sent the single currency to record-lows against many of its currency rivals, whereas a succession of relatively positive data has sent the US Dollar soaring to chart-topping status.
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European Central Bank President Mario Draghi gave an interview to a Lithuanian magazine on Thursday which initiated the current Euro slump. ‘As regards monetary policy, we remain fully determined to counter risks to the medium-term outlook for inflation,’ said the ECB head in the text of an interview with Lithuanian business publication Verslo Zinios and provided in advance by the ECB. ‘We stand ready to use additional unconventional instruments within our mandate, and alter the size or composition of our unconventional interventions should it become necessary to further address risks of a too prolonged period of low inflation,’ he added.
US economic data was fairly mixed on Thursday but weak risk sentiment halted any huge declination. Durable Goods Orders showed a huge contraction by -18.2% although this was expected and was likely priced in by traders.
US labour market data printed reasonably; all hiving increased less than the market consensuses. The initial jobless and continuing claims did increase upon the previous figure, however, which relieves a little pressure on the Federal Reserve to normalise monetary policy.
The US Services PMI declined a little from August but still remains strong. It is a particularly important publication given that the services sector makes up around 70% of the US economy. Chris Williamson, chief economist at Markit said; ‘The US economy is enjoying its strongest spell of growth since the financial crisis, according to the PMI surveys. Although the pace of expansion slowed to a four-month low in services in September, the rate remained buoyant and accompanies a similar boom seen in manufacturing. Taken together, the two PMI surveys have posted the highest quarterly average seen since data was first collected in 2009 in the three months to September’.
The Euro to US Dollar exchange rate has hit a low today of 1.2713.
Friday has seen yet more negative data from the currency bloc’s largest economy. German GfK Consumer Confidence declined beyond the median market forecast of a drop from 8.6 to 8.5, with the actual data coming in at 8.3. This has caused the single currency to continue to depreciate despite news that 18 banks have told their respective central banks that they intend to repay funds from the LTRO allotments, a total of €4.869 billion.
The US annualised second-quarter Gross Domestic Product score met with the market forecast of a growth from 4.2% to 4.6%. This has aided the US Dollar’s bullish run.
Forecast for the Euro to US Dollar Exchange Rate
It is very likely that the Euro to US Dollar exchange rate will stay on its current course over the weekend. As trader risk aversion dictates currency movement the Euro will continue to decline, and the US Dollar will continue to appreciate.