Euro to US Dollar (EUR/USD) Exchange Rate Down -0.8%
The European Central Bank’s (ECB) introduction of aggressive stimulus measures saw the Euro to US Dollar (EUR/USD) exchange rate plummet beyond an 11-year low on Thursday and the pairing extended declines before the weekend.
The EUR/USD pairing failed to benefit from some better-than-forecast manufacturing and services PMI’s from the Eurozone and its largest economy.
Although Germany’s Manufacturing PMI printed at 51.0 – below the 51.7 forecast, the nation’s Services PMI came in at 52.7 rather than the 52.5 projected. The indexes for the Eurozone as a whole also bettered predictions.
However, the Euro to US Dollar (EUR/USD) exchange rate was still trading in the region of 1.1261 ahead of the publication of the US Manufacturing PMI.
EUR/USD Exchange Rate Volatile as ECB Issues Statement
The Euro to US Dollar (EUR/USD) exchange rate fluctuated continually during European Central Bank (ECB) Mario Draghi’s policy statement.
The central bank chief was the subject of intense scrutiny as he outlined the ECB’s intentions and the EUR/USD pairing fluctuated between highs of 1.1651 and lows of 1.1510.
While the central bank left interest rates on hold, it has announced a quantitative easing programme amounting to 60 billion Euros a month.
The scheme will run until September of next year, taking the total to over 1 trillion Euros.
The EUR/USD exchange rate fell to a fresh over 11-year low of 1.1451
Meanwhile, although the US initial jobless claims report wasn’t quite as good as forecast, the strong domestic House Price Index saw the EUR/USD downtrend continue.
The Euro to US Dollar (EUR/USD) exchange rate is currently trading in the region of 1.1464
The Euro to US Dollar (EUR/USD) exchange rate was trading within touching distance of an 11-year low as the European Central Bank’s (ECB) highly anticipated policy meeting inched closer.
EUR/USD Exchange Rate Lower on QE Bets
Despite a dearth of economic reports for the Eurozone, the Euro to US Dollar (EUR/USD) exchange rate advanced during Wednesday’s European session as investors speculated on the likely outcome of today’s ECB gathering.
The pairing experienced minimal movement in response to a mixed bag of economic reports for the US.
Data showed that building permits unexpectedly fell by -1.9% on the month in December (rather than increasing the 0.8% expected) while housing starts increased by 4.4% in the same period (a rise of 1.2% had been projected).
However, before the close of trading the EUR/USD pairing shed earlier gains as the Bank of Canada’s shock decision to cut interest rates sparked a risk-off environment.
The Euro to US Dollar (EUR/USD) exchange rate fell to a low of 1.1573
Last week the Swiss National Bank (SNB) reminded us how unpredictable central banks can be by scrapping its 1.20 cap with the Euro.
The common currency plummeted in response to the decision, and the BOC’s move increased the sense of unease among investors and industry experts.
As the BOC’s rate cut was largely due to the over 50% slide in oil prices, the odds of the Reserve Bank of Australia (RBA) and Reserve Bank of New Zealand (RBNZ) adopting the same approach to counter the impact of falling iron ore and dairy prices increased.
Demand for higher-risk currencies fell accordingly and the US Dollar advanced.
The Euro to US Dollar (EUR/USD) exchange rate achieved a high of 1.1629
Euro losses were also sustained following the publication of statements from an unnamed ECB official regarding the potential size and duration of a quantitative easing programme.
As industry expert Dean Popplewell highlights; ‘This market is very nervous. The bullish expectation for Draghi to deliver is somewhat priced in. If the ECB wavers at all, these markets are going to severely punish the ECB.’
Similarly a representative from the Centre for European Policy Studies observed; ‘At stake here is the credibility and the unity of monetary policy in the Euro area. But it is a very divisive move, and the way it is executed might only reinforce the divisions in the region.’
Euro to US Dollar (EUR/USD) Exchange Rate Forecast
Of course, the ECB announcement (due to take place at 12:45 GMT) will cause the most volatility in the Euro to US Dollar (EUR/USD) exchange rate in the hours ahead.
If the QE programme outlined by the central bank amounts to the 1 trillion Euro level, the EUR/USD pairing is likely to fall beyond an 11-year low.
The US initial jobless and continuing claims figures could cause exchange rate movement, but to a much lesser extent.
The Euro to Pound Sterling (EUR/GBP) exchange rate was trending in the region of 0.7663
The Pound Sterling to Euro (GBP/EUR) exchange rate was trending in the region of 1.3047
The US Dollar to Euro (USD/EUR) exchange rate was trending in the region of 0.8630
The Euro to US Dollar (EUR/USD) exchange rate was trending in the region of 1.1624