The Euro to US Dollar (EUR/USD) exchange rate is forecast to experience another week of under performance as concerns over the strength of the Eurozone economy are expected to continue to weigh heavily upon the single currency and the US currency is expected to receive support on signs of further strengthening in the world’s largest economy.
Euro to US Dollar (EUR/USD) Exchange Rate Declines after US Jobs Data
At the end of last week, the US Dollar climbed to a new multi-year high after Non-farm payrolls data showed that the US economy created the largest number of jobs in almost three years and wages increased.
Wage growth and the strength of the jobs market were listed as key factors by the Federal Reserve to determine when to raise interest rates. The strong report caused investors to raise their bets that the Fed will now increase rates in the early part of 2015, sooner than previously forecast.
Goldman Sachs said of the report; ‘Today’s report increases the chances the FOMC decides to modify its “considerable time” forward guidance at the December meeting.’
German Data Set to Impact EUR/USD Exchange Rate this Week
After German industrial production failed to meet with expectations on Monday, the Euro to US Dollar (EUR/USD) exchange rate dived by around -0.23%. The US Dollar, meanwhile, has strengthened against its major peers as a result of trader risk aversion.
The Euro to US Dollar exchange rate is currently trending in the region of 1.2258.
Monday’s German data has printed poorly, allowing the shared currency to soften against the majority of its most traded rivals. Year-on-year German Industrial Production was forecast to advance from 0.1% to 0.9%, but the actual result only reached 0.8%. On a monthly basis, German Industrial Production declined from 1.1% to 0.2%, despite the median market forecast of a drop to 0.4%.
The US Dollar has strengthened against its currency competitors after data out of China impacted upon risk sentiment. China’s imports and exports declined significantly, fuelling anxieties regarding global economic disparity. The US Dollar has strengthened as a result of its safe-haven qualities. In addition, the policy divergence between the Federal Reserve and other major central banks bolstered ‘Greenback’ (USD) gains.
Tuesday’s session will see the release of balance of trade data for both Germany and France. A decline will add to concerns over the performance of the region’s top two economies. If the data comes in worse than forecast we could see the Euro weaken further and perhaps see the Pound dip as the Eurozone is the UK’s largest trading partner.
Last month Germany’s trade data came in above forecasts. According to Stock Market Wire; ‘Germany’s trade balance rose to 18.5bn Euros surplus in October, from a 17.5bn Euros surplus in September. The market expected a balance of 18.3bn Euros. German industrial production rose a seasonally adjusted 1.4% in September from August, when it contracted a revised 3.1%. The market had anticipated a rise of 2.1%. Meantime, France’s September trade balance was a deficit of 4.7bn Euros, from a downwardly revised 5.0bn Euros in August. A deficit of 5.2bn Euros was forecast.’
Data out of the USA, meanwhile, includes Chain Store sales and Job openings.
Thursday will be the most important day for the EUR/USD exchange rate as the latest inflation data out of Germany and France will be published. A further drop in the inflation rates will surely send the Euro even lower as data released last month showed that inflation across the Eurozone fell further away from the ECB’s target of 2%. Also of interest will be US retail sales and jobless claims data.
Euro to US Dollar Exchange Rate Key Data
Monday December 8th – EUR – German Industrial Production, Eurozone Sentix Investor Sentiment
Tuesday December 9th – EUR – German, France Trade Balance
USD – Jobs Opening Data, Chain Store Sales
Thursday December 11th – EUR – German, France Inflation Rate, Italian Industrial Production
USD – Retail Sales, Jobless Claims
Friday December 12th – EUR – Eurozone Industrial Production
USD – US PPI, Consumer Sentiment
