The Euro to US Dollar exchange rate fell last week, but the pair has failed to register much movement since markets reopened after the weekend. EUR/USD trended in the region of 1.06 at the time of writing, down from last week’s high of 1.07.
Euro (EUR) Weakens as Eurozone Political Concerns Persist
A lack of fresh new supportive factors for the Euro have left the shared currency weaker on Monday. Instead, the Euro continued to react to ongoing downside risks, such as concerns surrounding the growing wave of nationalist populism in the Eurozone.
With key Eurozone elections taking place throughout the year in France, Holland and Germany, investors are concerned that nationalist policies could become more popular.
To investors, this is being seen as one of the biggest threats to the Euro itself, with some fearing that the currency could collapse if a key nation were to abandon it.
Dovish forecasts from the European Commission (EC) on Monday also weakened demand for the Euro. The EC expects Eurozone growth to slow in 2017 before picking up again in 2018, due to the political risks inspired by last year’s Brexit and Trump votes.
US Dollar (USD) Slips as US Markets Focus on Stocks
The US Dollar was unable to capitalise on a weak Euro when markets opened this week as Trump jitters kept traders from piling into the US Dollar.
Last week, the new US President stated that his radical tax reform policies would be announced in the near future. With some investors expecting the plans to be detailed this week, the Trump stock-rally seen in late-2016 continued.
However, the US Dollar failed to benefit from the news. Friday’s Michigan confidence print slipped further than expected, from 98.5 to 95.7.
This caused investors to grow concerned that citizen confidence would drop and affect consumer sectors and potentially affect US growth in the mid to long-term.
EUR/USD Forecast: Key Eurozone Data Ahead
Tuesday’s European session will be vital for this week’s Euro movement as it will see the publication of a slew of key Eurozone ecostats.
Germany’s preliminary Q4 Gross Domestic Product (GDP) results will be published alongside January’s final German Consumer Price Index (CPI) results on Tuesday morning.
This will be followed by Italy’s preliminary Q4 growth results and then the Eurozone’s overall preliminary GDP figures later in the morning.
Also due for publication on Tuesday will be ZEW’s February economic sentiment surveys for Germany and the Eurozone.
If many of these ecostats beat expectations, it’s likely the Euro to US Dollar exchange rate will put in a solid recovery effort on Tuesday.
However, USD traders are sure to watch out for a speech from Federal Reserve Chairwoman Janet Yellen on Tuesday evening. If she appears hawkish on US interest rates, EUR/USD may not be able to advance even if Eurozone data impresses.
Yellen will deliver another speech on Wednesday. Wednesday will also see the publication of key US ecostats including January inflation results and retail sales, which will give the US Dollar more room to manoeuvre in the latter half of the week.