- Euro ticks higher after ECB holds rates
- USD trending up despite weak manufacturing activity
- US labour market data improves
- Euro forecast to strengthen after Draghi avoids jawboning
Euro (EUR) Exchange Rates Improve Modestly after ECB Holds Rates
The Euro to US Dollar (EUR/USD) exchange rate was trending within a tight range on Thursday afternoon.
With markets expecting European Central Bank (ECB) President Mario Draghi to deliver a dovish speech following the ECB’s interest rate decision, the Euro climbed as Draghi showed confidence in current stimulus measures.
Draghi boldly claimed that the ECB’s stimulus package is the only central bank policy having a positive impact. ‘Our policies work, they are effective. Just give them time to fully display their effects,’ he stated.
Many analysts still predict further easing to come from the ECB this year, however.
The central bank will ‘take stock of the market response to the March package, clarify its broader policy message and possibly announce detailed modalities of its upcoming purchases of non-financial corporate bonds,’ said Greg Fuzesi, an economist at JPMorgan. Inflation ‘is unlikely to rise as quickly as projected by the ECB staff and therefore we expect the ECB to ease further toward the end of this year.’
Also supportive of demand for the single currency was comparatively positive domestic data. The Eurozone Government Debt to GDP Ratio dropped from 92.0% to 90.7%. Additionally, Eurozone Consumer Confidence met with the median market forecast improvement from -9.7 to -9.3.
The Euro to US Dollar (EUR/USD) exchange rate is currently trending in the region of 1.1297.
US Dollar (USD) Exchange Rate Forecast to Tick Higher despite Weaker-than-Anticipated Manufacturing Activity
With risk-correlated assets struggling against damp market sentiment amid stock price volatility, demand for the safe-haven US Dollar improved. This allowed the US asset to make modest gains versus a number of its major peers despite a mixed-bag of results from domestic data.
US labour market data produced positive results. In the week ending April 16th, Initial Jobless Claims dropped to 247,000 from 253,000; bettering the market consensus of a rise to 265,000. In addition, Continuing Claims came in at 2.14 million in the week ending April 9th which was below the market projection of 2.18 million.
Also supportive of demand for the US asset was data which showed that February’s House Price Index met with the market consensus of a rise by 0.4% on the month.
‘You’ve got increasing numbers of buyers coming up against a stock of existing homes that’s essentially unchanged since the beginning of 2012,’ said Matthew Pointon, US economist. ‘That leads to high prices because it becomes a sellers’ market.’
The Euro to US Dollar (EUR/USD) exchange rate dropped to a low of 1.1275 during Thursday’s European session.
EUR/USD Exchange Rate Forecast: Eurozone Sectoral Activity to Provoke Volatility
Given the absence of any further influential domestic data pertaining to either Europe or the US, there is a high chance that the Euro to US Dollar (EUR/USD) exchange rate will continue to trend within a limited range.
Friday is likely to see considerable EUR/USD exchange rate volatility, however. The Eurozone Manufacturing, Services and Composite PMIs should provoke significant changes.
Additionally, Friday’s US Manufacturing PMI may potentially cause EUR/USD changes.
Market sentiment and commodities prices will also play a key role in the EUR/USD exchange rate.
The Euro to US Dollar (EUR/USD) exchange rate reached a high of 1.1399 during Thursday’s European session.