Today’s Euro Forecast
The Euro spent the first half of the week struggling as German data disappointed expectations. Concerns that the Eurozone’s largest economy might be on the verge of recession were compounded after Germany’s Factory Orders and Industrial Production figures flopped.
However, on Wednesday the Euro eked out a modest gain against the Pound amid a dearth of influential European data. The currency managed to maintain its advance even as German Chancellor Angela Merkel clashed with French President Francois Hollande.
France is another European nation struggling to step out of the shadow of the global economic crisis and today Hollande asserted that the European Union, and particularly nations like Germany, need to do more to improve investment and the unemployment situation.
However, Merkel failed to offer her French counterpart any support and instead noncommittally stated; ‘We need to invest, yes, but we need to know where to invest, we need to know where the jobs are. We need to know what the professions of the future are. In the whole digital area I see the opportunities for the future. That’s where we should train people.’
Will the Euro Exchange Rate Climb?
With the economic calendar looking a lot fuller today than it did yesterday, the Euro exchange rate could be in line for some volatility.
Reports to take not of include Germany’s trade balance figures and the publication of the European Central Bank’s Monthly report. Another disappointing German statistic, or any quantitative easing hints from the ECB, could drive the Euro exchange rate lower.
Today’s US Dollar Forecast
On Wednesday the US Dollar softened from a four-year high following the publication of minutes from the latest Federal Open Market Committee meeting. While investors had been hoping for a hawkish set of minutes, given that US data has had the tendency to surprise to the upside of late, the Fed instead stressed the risks posed to the US economic outlook by a strong local currency.
The FOMC also outlined concerns regarding the slowing pace of global growth.
As well as sliding by 0.6% against the Euro in the immediate aftermath of the minute’s release, the US Dollar fell to a low of 0.6180 against the Pound.
According to industry expert Lennon Sweeting; ‘It kind of looks like the Fed will take any excuse not to normalize rates in the near term. What we’re seeing is consolidation and probably a brief period of stability. Overall, the bull rally on the Dollar is still intact.’
Will the US Dollar Exchange Rate Climb?
It will be remembered that the minutes were taken before the US published an inspiring set of employment figures. Now that the nation’s unemployment rate has dropped to a six-year low, and with other fundamentals impressing, the FOMC may have little choice but to ditch the dovishness at their next gathering.
In the short-term, the US Dollar could recoup losses today if the US Initial Jobless and Continuing Claims figures impress.
Initial jobless claims are forecast to have risen from 287,000 to 294,000 while continuing claims increased from 2398,000 to 2410,000.
US Wholesale Inventories figures will also be of note, as will a speech to be given by Fed President James Bullard.
We forecast that any suggestion from Bullard that interest rates should climb would see the US Dollar (USD) exchange rate advance.
