US Dollar to Euro (USD/EUR) Exchange Rate Tumbles on Pared Fed Bets
In the aftermath of the publication of the minutes from the most recent Federal Reserve policy meeting the US Dollar has softened against all of its most traded currency competitors. Despite yet more disappointing data from the currency bloc’s largest economy, the Euro has maintained a near-weekly-high position against the ‘Buck’ (USD).
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As investors and economists alike speculated on a sooner-than-expected Federal Reserve rate hike the US Dollar enjoyed a sustained chart-topping position. Demand for the ‘Greenback’ surged regardless of economic data which led to concerns that the US Dollar gains weren’t fully justified.
Those invested in the Euro have struggled against a succession of disappointing economic data publications out of Germany. A complete absence of economic data on Wednesday, however, allowed the Euro to make unforeseen gains against many of its major peers.
The US Dollar to Euro exchange rate has hit a low today of 0.7820.
Thursday has seen the US Dollar tumble against all of its rivals after the publication of dovish Fed minutes. Many officials have been calling for a rate hike before mid-2015 on the basis of improvement in the labour market.
However, concerns over the high valuation of the US Dollar and uneven, country-specific global growth have quashed bets of a sooner-than-expected benchmark rate increase.
‘Some participants expressed concern that the persistent shortfall of economic growth and inflation in the Euro area could lead to a further appreciation of the Dollar and have adverse effects on the US external sector,’ according to the minutes. ‘Several participants added that slower economic growth in China or Japan or unanticipated events in the Middle East or Ukraine might pose a similar risk.’
The single currency has trended lower against the majority of its major competitors on Thursday after yet more German data failed to impress. German Trade Balance was forecast to decline from 23.5 billion to 17.7 billion, but the actual data showed a drop to 14.1 billion.
Further Euro declination can be expected as markets digest the European Central Bank’s monthly report. The majority of the publication was broadly an explanation of the covered bonds and asset-backed securities purchase programs announced in September.
However, once again the report outlined the policymakers’ willingness to resort to harsher stimulus measures if necessary. The Governing Council said that they are prepared to act again ‘using additional unconventional instruments within its mandate.’
Forecast for the US Dollar to Euro Exchange Rate
With a lack of European economic data on Friday the single currency is likely to continue trending lower against high-yielding currencies.
Those invested in the US Dollar will be watching the Monthly Budget Statement which is forecast to tick lower from $75.1 billion to $72.0 billion.