The Euro to US Dollar exchange rate has been attempting a recovery since Monday as continuously poor US data dents the ‘Greenback’ and investors settle ahead of Wednesday’s FOMC decision. The pair’s advance continued on Tuesday, with EUR/USD trending around 1.1310.
ECB Freezes Rates, Fed may Slow Rate Hikes
Euro (EUR) investors displayed a muted response last week after the European Central Bank (ECB) announced that rates would be frozen.
The central bank did hint that they could be cut further in the next year or so and that borrowing costs will certainly not be hiked until after March 2017, when quantitative easing measures are set to expire.
This news was unsurprising to many investors, but weighed on the Euro nonetheless as concerns for the Eurozone’s economic outlook persisted.
On the other hand, the Federal Reserve’s recently dovish tone alongside a continued slew of worse-than-expected US data has investors worrying that US interest rates may be hiked by even less in 2016 than the 50 basis points recently forecast.
Quiet Data Week for Euro, German IFO Poor
Tuesday’s session is completely without key Eurozone data, leaving EUR/USD to move entirely on Monday’s data, ECB concerns and US Dollar favour.
April’s German IFO reports released on Monday morning all printed below expectations. Business climate scored 106.6, falling below both forecasts and the previous figure.
The current assessment report came in at 113.2, despite projections of it holding steady at 113.8.
Lastly, the expectations report only advanced from 100.0 to 100.4, disappointing hopes that it would improve to 100.9.
US Data Consistently Disappoints
Despite
the Euro (EUR) appearing unappealing
, the US Dollar has been faring worse as last week’s run of consistently poor US data looks to continue.
Monday’s new home sales report (from March) revealed a surprising contraction of -1.5%, disappointing forecasts of 1.6%.
Today’s US data has also printed well below expectations, with the highly anticipated durable goods orders report scoring only 0.8%, undercutting forecasts of 1.8%.
This follows a series of disappointing key prints last week, including preliminary Manufacturing PMI, the Philadelphia Fed’s manufacturing survey and housing data.
With the latest Federal Open Market Committee (FOMC) decision around the corner and the Federal Reserve’s recent dovishness in focus, the underwhelming data weighed heavily on the US Dollar as investors feared that growth in the world’s largest economy may be slowing.
Euro to US Dollar (EUR/USD) Forecast: FOMC Takes Centre Stage
Investors are likely to show continued distaste for the US Dollar if Wednesday’s Federal Open Market Committee (FOMC) rate decision reveals plans to leave interest rates on hold for longer.
However, if data this week prints positively and the Fed maintains its previous stance, the US Dollar could begin to recover losses.
Tuesday’s key data includes April consumer confidence and more preliminary PMI releases, and Thursday sees jobless claims data and US GDP reports.
The Eurozone’s data calendar is less bustling, but will see April’s highly anticipated unemployment and CPI reports on Thursday and Friday. A positive print on these could strengthen hopes that the Eurozone economy is improving.