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Euro Exchange Rate (EUR/USD, EUR/GBP EUR/NZD) Forecast: Eurozone Core Inflation Slips to 0.5% from 0.7%

European Central Bank

The Euro exchange rate could be volatile against other majors such as the Pound (EUR/GBP), US Dollar (EUR/USD) and New Zealand Dollar (EUR/NZD) after Eurozone Core Consumer Price Index figures fell below forecasts.

Inflation dipped from 0.7% to 0.5% while the non-core measure tumbled further into deflationary waters at -0.6% from -0.2%.

Earlier… The Euro exchange rate made modest gains in Friday’s European session against the US Dollar (EUR/USD), Pound (EUR/GBP) and New Zealand Dollar (EUR/NZD) after German Retail Sales printed surprisingly well.

The annual figure rose out of contraction of -1.0% and into growth at 4.0% in December, higher than the forecast 3.6%.

Earlier… The Euro exchange rate continued its advance against the US Dollar (EUR/USD), Pound Sterling (EUR/GBP) and the New Zealand Dollar (EUR/NZD) despite German inflation figures falling below forecasts and into deflation for the first time since 2009.

The Consumer Price Index (CPI) slipped from 0.2% to -0.3%.

Meanwhile, US data proved favourable when Initial Jobless Claims rose by only 265K in the week through January 24th, a far cry from the 300K forecast.

Earlier… The Euro exchange rate climbed against the US Dollar (EUR/USD) the Pound Sterling (EUR/GBP) and the New Zealand Dollar (EUR/NZD) in the early hours of Thursday’s European session after German Unemployment Rate stats recorded the lowest level of joblessness since 1990.

German joblessness edged 9K lower in January to a seasonally adjusted 2.836 million, which pulled the January ecostat down from a negatively revised 6.6% to 6.5%.

Meanwhile, the US Dollar recorded gains on Wednesday after the Federal Open Market Committee (FOMC) remained upbeat in its latest interest rate statement. The Federal Reserve is currently one of the only central banks expected to viably hike interest rates this year, offering support to the US Dollar exchange rate.

Many investors had been expecting a dovish statement from the central bank as inflation falls and the global economy slows. However, it appears the positive statements from the Fed were enough to cause a US Dollar rally.

Industry expert John Plassard commented: ‘The bullish tone by the Fed on the economy caught investors off-guard.’

However, politics in Greece could impact the Euro to US Dollar (EUR/USD) exchange rate if any new developments are made.

Plassard continued: ‘Meanwhile, investors are fretting about Greece again, and it could go on for a while. What happened yesterday with Athens’s bourse losing 9% is spooking investors. That said, it’s too early to draw conclusions about the new government.’

Meanwhile, the Pound softened when UK House Prices declined in January from 7.2% to 6.8% on the year. The figure showed a slowing housing market and offered further support to the hypothesis that the UK economic recovery is weakening.

Property expert Henry Pryor commented: ‘The heat is clearly coming out of the market but it is too early to tell what effect the stamp duty changes announced in the Autumn Statement may have.’
However, others are optimistic that the UK property market will recover.

Nationwide, who conduct the survey, commented on the result.

Chief economist Robert Gardner stated: ‘Annual house price growth continued to soften at the start of 2015. If the economic backdrop continues to improve as we and most forecasters expect, activity in the housing market is likely to regain momentum in the months ahead.’

RBNZ Interest Rate Announcement Causes New Zealand Dollar (NZD) Exchange Rate to Fall

Meanwhile, the New Zealand Dollar plummeted after Wednesday’s Reserve Bank of New Zealand (RBNZ) interest rate announcement.

After the Bank of Canada (BOC) recently cut rates in a surprise market movement, investors have forecast the RBNZ and Reserve Bank of Australia (RBA) to be next in line.

The ‘Kiwi’ fell to below 49 pence against the Pound Sterling (NZD/GBP) after RBNZ Governor Graeme Wheeler stated that although the Official Cash Rate (OCR) would remain at 3.50% this time, there was the possibility that the next interest rate meeting could see the OCR move either ‘up or down’.

Foreign exchange expert Tim Kelleher commented: ‘I think people were reticent to price in any cuts. The offshore market has been pushing for this anyway since last week when the Bank of Canada cut rates.’

‘The market is starting to price in more aggressive cuts. The Reserve Bank of New Zealand was probably too focused on the Auckland housing market and inflation, but there’s now talk of a drought, which is going to hit GDP.’

Euro to Pound Sterling (EUR/GBP), US Dollar (EUR/USD) and New Zealand Dollar (EUR/NZD) Exchange Rate Forecast

Plenty of movement is still to come in Thursday’s European session with the release of the German Consumer Price Index (CPI). Any fall in inflation could weigh on the Euro exchange rate quiet significantly.

In addition, UK CBI Reported Sales ecostats will also be out and could influence the Pound Sterling to Euro (GBP/EUR) exchange rate.

The US Dollar could become bullish against the Euro (USD/EUR) once again if Initial Jobless Claims and Continuing Claims ecostats print favourably in line with forecasts. Furthermore, US Pending Home Sales is expected to leap by 10.9% in December from 1.7% on the year.

New Zealand Building Permits and Net Migration ecostats are scheduled for release on Thursday and may be of slight influence to the New Zealand Dollar to Euro (NZD/EUR) exchange rate. However, after the RBNZ comments, it seems unlikely that the ‘Kiwi’ will be able to regain much strength.

The Euro to US Dollar (EUR/USD) exchange rate is residing in the region of 1.1303. The Euro to Pound Sterling (EUR/GBP) exchange rate is trading at 0.7463. The Euro to New Zealand Dollar (EUR/NZD) exchange rate has softened to 1.5517.