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Euro to US Dollar (EUR/USD) Exchange Rate Forecast to Weaken on Stimulus Bets

Euro Currency Forecast

The Euro to US Dollar (EUR/USD) exchange rate softened by around -0.20% on Monday morning.

Although the US Dollar softened over the course of last week, after futures traders speculated a delay to rate revisions thanks to less-than-ideal labour market data, the shared currency slumped versus its North American rival. This can be attributed to the considerable likelihood that the European Central Bank will undertake an aggressive bond buying scheme in the near future.

The Euro to US Dollar (EUR/USD) exchange rate is currently trending in the region of 1.1815.

Previously…

The Euro to US Dollar (EUR/USD) exchange rate is likely to soften over the course of next week with policy divergence dominating trader focus.

US retail sales data will be of particular significance to those invested in the US Dollar. Should the data print positively, the Federal Reserve will feel the pressure from hawks to raise rates.

However, according to Bloomberg; ‘Retail sales in the US, where consumer spending accounts for almost 70% of the economy, probably cooled in December, data in the coming week may show.’

Next week’s economic docket is fairly sparse with regards to European data publications but Eurozone Industrial Production will be of significance to those trading with the shared currency.

Euro (EUR) Exchange Rate Forecast to Soften on ECB QE Bets

In general, the shared currency is likely to soften over the course of the coming week amid mounting speculation that the European Central Bank (ECB) will act in the near-future to stimulate the Eurozone’s economic recovery. Every data publication that fails to meet with expectations ups the odds of aggressive bond-buying being deployed in order to avoid significant deflation and recession.

Economist James Ashley noted; ‘The emergence of negative inflation does forcefully raise the spectre of a possible prolonged period of deflation. For those policymakers who, hitherto, might have been undecided over whether or not to take further action immediately, this may be just the clarion call that was required to appreciate the gravity of the situation.’

With a distinct lack of influential domestic data over the course of next week, the Eurozone industrial Production data may be considered more significant in terms of its affect on market movement than it would ordinarily. Year-on-year Industrial Production is forecast to soften from 0.7% to 0.31% and monthly Industrial Production is expected to drop from 0.1% to -0.28%.

US Dollar (UDS) Exchange Rate Forecast to Strengthen on Fed Speculation

The US Dollar softened against the majority of its most traded rivals at the close of last week after Minneapolis Federal Reserve President Narayana Kocherlakota said; ‘The Fed can best achieve its macroeconomic objectives by not raising the fed funds rate target this year.’ However, rate hawks are still envisaging an increase in borrowing costs taking place in the first half of the year and  the Fed will come under pressure from any positive result over the coming week.

For those invested in the US Dollar; JOLTs Job Openings, Monthly Budget Statement and Business Inventories will be of interest. As previously mentioned, US Retail Sales will be of particular interest. Should the data improve upon forecast figures, the Federal Reserve will come under pressure from hawks to normalise monetary policy in the near-future.

On Sunday the Euro to US Dollar (EUR/USD) exchange rate was trending in the region of 1.1844