On Thursday, the Euro to US Dollar (EUR/USD) exchange rate rallied significantly as a result of Greece submitting a new revision to their reform proposal.
After Greece submitted the latest version of their reform proposal in order to satisfy creditors demands, the shared currency advanced versus most of its major peers. Although opinion is divided as to whether creditors will accept the proposal, fears regarding a Greek exit from the Eurozone eased somewhat.
The US Dollar, conversely, slumped versus most of its major peers on Thursday. This can be attributed to the hangover from Wednesday’s less-than-ideal manufacturing data. Such was the disappointment of the ISM Manufacturing PMI that Thursday’s positive US labour market data failed to impact upon ‘Greenback’ (USD) movement.
Euro (EUR) Exchange Rate Forecast to Resume Declination
Until more is known about the acceptability of Greece’s latest reform proposal, there is heightened potential for the single currency to resume declination. A complete absence of domestic data on Friday will see the shared currency subject to geopolitics, and much will rest on comments from European officials with regards to Greece.
In addition to the situation in Greece, the European Central Bank’s (ECB) quantitative easing program may come into question. Thursday saw European Central Bank Executive Board member Sabine Lautenschlaeger question the effectiveness of the bond-buying programme. ‘Given the low interest rates in the Eurozone, I have doubts, whether the economic impact of the purchasing programme will reach the desired level,’ a magazine on Thursday quoted Lautenschlaeger as saying.
US Dollar (USD) Exchange Rate Forecast to Recover Losses
Provided that US labour market data prints in line with median market forecast figures, the US Dollar should resume the appreciation seen at the beginning of the week. Change in Non-Farm Payrolls, which tracks the monthly change in employment excluding the farming sector, is forecast to show 248,000 fewer unemployed compared with the previous figure of 295,000. March’s Unemployment Rate is expected to hold at 5.5% as seen in February.
For those invested in the US Dollar; Change in Private Payrolls, Two-Month Payroll Net Revision, Average Hourly Earnings, Average Weekly Hours All Employees, Underemployment Rate and Change in Household Employment will be of interest.
A positive result from US labour market data is likely to pressure the Federal Reserve into tightening monetary policy, especially given that Chair Janet Yellen has linked positive labour data with cash rate revisions.
If Greece’s proposal is accepted by creditors it doesn’t necessarily mean the single currency will rally, because traders are likely to turn their attention to quantitative easing.
Should Greece’s proposal get rejected by creditors there’s a high likelihood that the common currency will lose all the gains made on Thursday. The US Dollar is likely to benefit as investors flock to safe-haven assets.
