On Tuesday, the Euro to US Dollar (EUR/USD) exchange rate strengthened as PMI data out of France and Germany came in better than forecast. PMI data for the wider Eurozone also came in positively.
As the session progressed the Euro to US Dollar (EUR/USD) exchange rate weakened as US economic data came in positively. Official data showed that industrial production rose 1.3% in November, compared to expectations for a 0.7% gain, after an 0.1% uptick in October, whose figure was revised from a previously estimated 0.1% slip.
Earlier on Monday the Euro to US Dollar (EUR/USD) exchange rate softened as investors look ahead to Wednesday’s upcoming Federal Reserve policy meeting and expectations that the Eurozone is sliding closer towards deflation.
As the week progresses the Euro is likely to soften further as economists raise their bets that Federal Reserve policy makers will be more hawkish at the meeting.
The Euro to US Dollar (EUR/USD) exchange rate managed to firm on Friday as the single currency found support from a report showing that Eurozone industrial production increased in line with market expectations. The US currency was also softened by a dip in US producer price inflation.
Euro to US Dollar (EUR/USD) Exchange Rate Fluctuations Forecast
Looking ahead to next week, the EUR/USD exchange rate looks set to experience another volatile few days. With economic data out of the Eurozone showing that the region is continuing to struggle, we can expect the single currency to remain under considerable pressure.
On Monday, the currency pair is likely to be weakened by a lack of Eurozone centric data releases. The main data releases of the session will come from the USA. Industrial production and the NAHB Housing Market Index will be the major releases that could support the ‘Greenback’. With a run of data beating forecasts lately the US data could again exceed expectations, if that happens then the US Dollar will make gains.
That being said, US industrial production did fall by 0.1% on the month in October, defying expectations for a 0.2% gain. Falling energy prices contributed to the surprising slump.
Euro (EUR) Exchange Rate Could be Boosted by German Data
On Tuesday, the Euro could receive some support if data out of Germany shows signs of improvement. Economists are forecasting that a flash Manufacturing PMI will come in weaker in December from the previous month; however, they are also expecting the latest ZEW Economic Sentiment data to come in positively. Sentiment across the wider region is also forecast to show signs of improvement.
Last month German Manufacturing PMI was shown to have fallen to a 17-month low and Markit economist Oliver Kolodseike stated;German manufacturers continued to record growth of production in November, but this expansion seems to be based on increasingly shaky foundations. In particular, output expanded despite lower backlogs, falling stocks of finished goods and the sharpest drop in new orders for almost two years.’
FOMC Decision to Cause EUR/USD Movement on Wednesday
Wednesday will be the most important session for the currency pair, as market attention will fix upon the evening’s interest rate decision by the Federal Reserve. Investors are expecting the central bank to leave interest rates unchanged but any signs that policy makers are edging closer to hiking rates will send the US Dollar climbing against the Euro and other major peers. The latest inflation rate data for the Eurozone will also be published and any signs that the region is sliding closer towards deflation are likely to weaken the currency and increased pressure on the European Central Bank to introduce new monetary easing measures.
A report published on Friday showed that consumer prices in Spain fell for a fifth consecutive month in November – a result which could pull CPI in the Eurozone as a whole lower. As stated by AFP; ‘Spain’s inflation rate was minus 0.5 percent in November on a seasonally adjusted basis, following a 0.2 percent fall in October, definitive monthly figures from the national statistics institute showed.’
The Fed meeting will likely dominate the US Dollar’s movements for the remainder of the week and its movement will depend on how hawkish or dovish the Fed’s policy makers appear to be. Thursday and Friday are also fairly quiet in terms of US economic data releases with the most important being the latest Continuing and Initial Jobless Claims data. Another positive report and the ‘Greenback’ will likely remain higher.
Last week initial jobless claims fell to a three-week low, and economist Scott Brown observed; ‘The trend in claims is still very, very low. Job destruction really hasn’t been the issue — the key has always been new hiring — and the new hiring appears to have picked up this year.’
Other events that are likely to affect the EUR/USD exchange rate include weak commodity prices and concerns over the wider global economy.
Economic Data affecting the EUR/USD Exchange Rate Next Week
Monday December 15 – USD – Industrial and Manufacturing Production
NAHB Housing Market Index
Tuesday December 16 – EUR – Eurozone Balance of Trade, German ZEW Sentiment
USD – Building Permits, Housing Starts
Wednesday December 17 – EUR -Eurozone Inflation
USD – Core Inflation, Federal Reserve Rate Decision
Thursday December 18 – USD – Jobless Claims Data
