The Euro to US Dollar (EUR/USD) Exchange Rate will be subject to intense volatility over the coming week. US Growth data and German inflation data are sure to ignite movement.
At the close of last week the Euro to US Dollar (EUR/USD) exchange rate weakened in response to European Central Bank (ECB) President Mario Draghi’s dovish speech regarding the introduction of additional stimulus.
According to Claire Jones of the Financial Times; ‘‘Mario Draghi has boosted hopes the European Central Bank is close to backing more aggressive monetary easing, with the ECB president challenging doubts the central bank’s bond-buying spree will do little to save the Eurozone from stagnation. A troubling mix of low inflation and sluggish growth in the region has sparked calls for policy makers to unveil a fresh round of monetary stimulus. But sceptics, including some members of the ECB’s governing council, have argued that further measures would be of little effectiveness in boosting the economy and would create unnecessary risks.’
EUR/USD to Fluctuate on German Business Conditions Reports
On Monday morning there will be several significant German data publications with the potential to provoke changes for the common currency. IFO Business Climate is a significant economic health indicator for the Eurozone as a whole. IFO Current Assessment and Expectations will also be of significance. Positive readings bode well for economic progress, suggesting increased consumer spending and economic growth. Conversely, low IFO readings may indicate an economic slowdown.
In terms of important US data, Monday afternoon’s US Services and Composite PMI’s have the potential to spark US Dollar movement. Given that the services sector accounts for a large proportion of the US Gross Domestic Product, the Services PMI is an important indicator of the US economic condition.
UPDATE
The Euro to US Dollar exchange rate is currently trending in the region of 1.2378.
Having softened significantly in the wake of a dovish speech from European Central Bank President Mario Draghi, the common currency has continued trending lower against the majority of its most traded rivals. Last week, Draghi reiterated his intention to resort to full-blown quantitative easing in order to aid Eurozone economic recovery. Monday’s German data has the potential to promote a Euro recovery should the data exceed expectations.
The US Dollar, meanwhile, has continued trending higher as a result of a softening Japanese Yen and Euro. ‘The combination of Japan’s monetary and fiscal policy largesse and the ECB’s now well-documented plans to expand its balance sheet at a time when the Fed has ended quantitative easing and is moving ever so steadily towards the exit continues to drive the U.S. dollar higher,’ analysts at National Australia Bank, including Attrill, said in a report today.
EUR/USD to Strengthen if US GDP is Revised
Tuesday’s German growth data will be of significance to common currency changes. The German GDP hit 1.2% previously. The OECD Economic Outlook data will also be of interest to those invested in the single currency.
The US Gross Domestic Product report will be of high weighting in terms of dictating US Dollar direction. The figure is forecast to drop from 3.5% to 3.2% which is likely to cause a US Dollar downtrend. Consumer Confidence, S&P/CS Composite-20, Core Personal Consumption Expenditure, Gross Domestic Product Price Index and Personal Consumption will all have the potential to provoke movement, although they are unlikely to register against the GDP data.
EUR/USD to Soften Amid Flood of US Figures
With a complete absence of domestic data on Wednesday, the single currency will be subject to changes from foreign currency movement.
There is a plethora of US data releases to be aware of, however. Perhaps the most significant of these will be the Durable Goods Orders, especially given that orders for goods have a large sway over actual production, and this figure serves as a valuable forecast of US output to come. Durable Goods Orders is forecast to advance from -1.3% to -0.5%.
For those invested in the US Dollar; MBA Mortgage Applications, Durables Ex Transportation, Initial Jobless Claims, Continuing Claims, Personal Income, Personal Spending, Core Personal Consumption Expenditure, Chicago Purchasing Manager, University of Michigan Confidence, Pending Home Sales and New Home Sales will be of interest. However, with such a significant amount of potential market moving data publications, traders will be likely to focus on the most influential to guide investment.
EUR/USD May Advance if CPI Ticks Higher
In complete contrast to Wednesday, Thursday will see an absence of US data and a flood of European publications. This means that the US Dollar movement will be dictated by foreign currency changes.
In terms of European data, the German Consumer Price Index data has the greatest potential to provoke volatility. The CPI is the headline inflation figure that indicates the strength of domestic inflationary pressures. German Unemployment Rate and Unemployment Change data will also be highly influential over Euro movement.
In October the pace of inflation in Germany unexpectedly slowed to 0.7%, prompting this response from industry expert Carsten Brzeski; ‘Looking ahead, the recent drop in energy prices – if sustained and not offset by strong currency weakening – could push German headline inflation further down. At the current juncture, price expectations of both consumers and producers remain solidly anchored in Germany. Therefore, even a further drop in headline inflation and/or dropping prices in some sectors are no reason to fear inflation’.
EUR/USD to Gain on Eurozone Inflation?
Once again, a distinct lack of US data will see the US Dollar subject to foreign currency movement. The US NAPM-Milwaukee publication is unlikely to have any significant bearing over US Dollar volatility.
There will be, however, several influential European economic data publications on Friday. Perhaps the most significant, in terms of its potential for initiating movement, will be the Eurozone Core Consumer Price Index as a key gauge for inflation in the Eurozone.
For those invested in the common currency, Eurozone CPI Estimate, Eurozone Unemployment Rate and German Retail Sales will all be of interest.
