The Euro to US Dollar (EUR/USD) exchange rate recorded gains in the early part of Friday’s trading despite France’s downward spiral into deflation.
French manufacturers have cut prices to keep market share awaiting action from the European Central Bank (ECB). The central bank has been surrounded by speculation for more aggressive action in the early part of 2015 as economies within the currency bloc fail to grow.
RBS representative Andrew Roberts commented: ‘Eurozone deflation is now inevitable. There is no way around it’
On Thursday… The Euro to US Dollar (EUR/USD) exchange rate remained bearish in Thursday’s European session after further hints of quantitative easing (QE) by the European Central Bank (ECB).
Industry expert Nick Kounis commented: ‘It now looks close to impossible for the ECB to achieve anywhere near a trillion Euro balance-sheet expansion with its existing measures. It will need to broaden asset purchases, and sovereign bonds will need to be part of the mix. The bottom line is that the disappointing TLTRO outcome has brought sovereign QE another step closer.’
Earlier… The Euro to US Dollar (EUR/USD) exchange rate retreated early in Thursday’s European trading as a result of the European Central Bank’s (ECB) Monthly Report.
However, despite leaving the interest rate unchanged, the central bank acknowledges that the Eurozone may be in for a bumpy ride.
The report read: ‘In the coming month, the measures [Asset Backed Securities and Targeted Longer-Term Refinancing Operation] will further ease the monetary policy stance more broadly, support the Governing Council’s forward guidance on the key ECB interest rates and reinforce the fact that there are significant and increasing differences in the monetary policy cycle between major advanced economies. However, the latest Euro area macroeconomic projections indicate lower inflation, accompanied by weaker real GDP growth and subdued monetary dynamics.’
Coeure Suggests ECB Needs Aggressive Action – Euro (EUR) Exchange Rate Gains
The Euro to US Dollar (EUR/USD) exchange rate recorded gains at the close of Wednesday’s session after European Central Bank (ECB) official Benoit Coeure reinforced the view that the central bank needed to take immediate action.
Coeure stated: ‘I see the risk that the Eurozone economy would stabilise on a path with low growth and low inflation.’
Coeure suggested that a stagnant growth and inflation could be called ‘one percent economics’ and continued to state: ‘My belief is that it is not sustainable.’
Coeure’s comments offer further hope that the European Central Bank will step up its monetary policy in January with more aggressive stimulus measures such as quantitative easing (QE).
Earlier… The Euro to US Dollar (EUR/USD) exchange rate has been trending lower in Wednesday’s European session after European Central Bank (ECB) Executive Board member Peter Praet suggested that the central bank would have cut interest rates at its last meeting, if it was possible to go any lower.
The ECB suggested that if interest rates weren’t presently residing at the historic low of 0.05%, the central bank would have lowered rates as the Eurozone recovery flounders.
Praet commented: ‘If we would have had interest rate margin at that time, I am convinced personally that the Governing Council would have decided to cut rates.’
Praet’s comments support the possibility of ECB action in January when policy-makers will reassess monetary policy in the currency bloc. Many economists have speculated that quantitative easing (QE) is the next viable step for the ECB to take to revive growth in the 18-nation economy.
Safe-Haven Demand Pushes US Dollar Exchange Rate Lower
The Euro to US Dollar (EUR/USD) exchange rate extended its gains in the second half of Tuesday’s trading after the Japanese Yen (JPY) pressured the ‘Greenback’ lower.
Foreign exchange strategist Lee Hardman stated: ‘The Yen has strengthened amidst more risk-averse trading conditions as global equity markets and commodity prices have declined. The US Dollar has also pared some recent gains amidst the sell-off, which may be more a reflection of increasingly elevated long-Dollar positions.’
The US NFIB Small Business Optimism index managed to expand in November from 96.1 to 98.1, smashing economists’ forecasts of 96.5.
Confidence rose to a near eight-year high improving hopes that the the US could recover at a swifter pace in 2015.
The NFIB stated: ‘What is needed is a translation of this optimism into spending and hiring.’
Earlier in the session… The Euro to US Dollar (EUR/USD) exchange rate recorded gains early in Tuesday’s European session after Germany posted a large trade surplus yet again as a weaker Euro continues to aid trading conditions.
Despite the slip in German exports, (-0.5% in October), the German Trade Balance resided at 21.9B in October. September had seen a slightly larger 22.1B surplus, but economists had forecast a fall to 18.9B on the year.
German Rebound Following Geopolitical Tensions Boosts Euro (EUR) Exchange Rate
The upbeat figures have been labelled ‘more evidence of Germany’s rebound’ by industry experts such as Carsten Brezeski.
Brezeski continued: ‘October trade data just added to recent evidence that the Eurozone’s largest economy gained some momentum at the start of the fourth quarter.’
Geopolitical tensions between Russia and Ukraine had an impact on the Eurozone’s progress earlier in the year, but some economists believe that the effect of that situation has passed.
Berenberg Bank representative Christian Schulz stated: ‘We expect German exports to continue to grow nicely throughout the rest of the year and in 2015 as German companies enjoy a strong competitive position, important developed export markets are growing nicely or rebounding and the weaker Euro helps a bit on global markets.’
US Dollar (USD) Exchange Rate Soft after Fed’s Lockhart Urges Patience
Meanwhile, the US Dollar has been trending lower after Atlanta Federal Reserve President Dennis Lockhart suggested that the Federal Reserve had plenty of time before needing to raise interest rates in the US.
Dovish Lockhart disappointed investors when he stated that increases in borrowing costs were likely to occur in the latter half of 2015 as low levels of inflation and weak global performance hinders the US economic recovery.
Lockhart stated: ‘Inflation is the one key element that does not seem to be consistent with what we are seeing in terms of growth and what we are seeing in the labour market. [If inflation] goes completely sideways or begins to indicate a decline, disinflation, then I think it will raise some concerns.’
Euro to US Dollar (EUR/USD) Exchange Rate Forecast
The US Dollar is awaiting NFIB Small Business Optimism figures later in Tuesday’s session. The index is expected to climb in November from 96.1 to 96.5—an event that could allow the US Dollar to Euro (USD/EUR) exchange rate to reclaim some lost ground.
Looking ahead, Thursday will see the release of the final German Consumer Price Index (CPI), which is forecast to reside at 0.5% on the year in November. In addition, Thursday will see the European Central Bank (ECB) publish its Monthly Report. This could be massively influential for the Single Currency, and by extension the EUR/USD exchange rate.
US Advance Retail Sales will also be published on Thursday and the data is currently forecast to record 0.4% growth in November after October’s 0.3%.
The Euro to US Dollar (EUR/USD) exchange rate is presently trending in the region of 1.2355. Meanwhile, the US Dollar to Euro (USD/EUR) exchange rate is residing at 0.8097.
US Dollar (USD) Exchange Rates
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
Pound,
,US Dollar , 1.5689,
Euro,,US Dollar , 1.2395,
Canadian Dollar,,US Dollar , 0.8732,
Australian Dollar,,US Dollar , 0.8322,
New Zealand Dollar,,US Dollar , 0.7710,
[/table]
