This week the Euro dipped against a broadly strengthening Pound but managed to recover recent losses against the US Dollar.
Although disappointing inflation figures for the Eurozone had little impact on the common currency, the UK’s positive employment data saw the Euro to Pound (EUR/GBP) exchange rate post its most significant decline for six weeks.
Pound Sterling largely held gains into the weekend, but the US Dollar didn’t fare so well.
Early in the week the US asset was bolstered by domestic retail sales and inflation figures, but after Fed Chairman Janet Yellen restated the Fed’s commitment to keeping interest rates at record lows the ‘Greenback’ stumbled against its peers and the Euro was able to advance.
The common currency pared its five-day decline against the US Dollar to 0.4 per cent on Thursday.
Currency strategist Robert Lynch remarked; ‘Some of the blame for the latest bout of Dollar slippage has been pinned on Yellen’s comments on Wednesday, which not surprisingly erred on the Dovish side. For the Dollar, emphasising the more dovish elements of Fed policy is an important factor that has continued to create more headwinds for the currency’.
However, while the Euro found firmer footing against the ‘Greenback; it remained lower against the Pound.
But this week could see a reversal of fortunes.
At its latest policy meeting the Bank of England opted to leave interest rates unaltered and policy unchanged.
If the minutes from the meeting (due for publication on Wednesday) indicate that the central bank intends to keep interest rates at record lows for the foreseeable future the Pound could shed this week’s gains and adopt a more bearish relationship with rivals like the Euro.
Also, although European Central Bank President Mario Draghi has voiced concerns regarding the strength of the Euro, intimating that additional stimulus may have to be introduced to defend against it, some industry experts have argued that such fears are overblown.
The Euro may be about 5 per cent higher against the US Dollar then it was in the same period of 2013, but in the opinion of ING economist Carsten Brzeski; ‘We shouldn’t make the mistake of seeing the US-Euro exchange rate as the proxy for the Euro exchange rate. It is not yet alarming. I don’t think this is a big reason for concern.’
We forecast that Euro movement will also be inspired by the Eurozone’s consumer confidence index and German/Eurozone manufacturing and services PMI figures next week.
US housing and durable goods data may go some way to dictating fluctuations in the Euro to US Dollar (EUR/USD) pairing, while investors interested in Euro to Pound (EUR/GBP) will be looking out for UK retail sales figures.
Euro Exchange Rates
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
Euro,
,Pound Sterling,0.8249,
Euro,,US Dollar,1.3802,
Euro,,Canadian Dollar,1.5197,
Euro,,Australian Dollar,1.4750,
Euro,,New Zealand Dollar,1.6002,
US Dollar,,Euro ,0.7246,
Pound Sterling,,Euro,1.2124,
Canadian Dollar,,Euro,0.6586,
Australian Dollar,,Euro,0.6781,
New Zealand Dollar,,Euro,0.6250,
[/table]
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