After a brief jump when markets opened on Monday morning, the Euro to US Dollar exchange rate swiftly reversed gains. While general sentiment towards the Eurozone is up, investors took profit from EUR highs and Fed rate hike bets boosted USD.
EUR/USD has fallen from 1.10 to 1.08 so far this week.
Euro (EUR) Fails to Benefit from Macron’s French Election Victory
Many analysts predicted the Euro would see something of a relief rally on Monday if pro-EU Emmanuel Macron won the weekend’s French Presidential election.
However, as investors had largely priced in a Macron victory already, the Euro failed to see much benefit. In fact, many traders took profit from the Euro’s strong position and sold it from its highs.
Concerns that Macron may face difficulty in his first months of power unless his ‘En Marche!’ party wins big in the upcoming legislative elections have also weighed on Euro demand.
This week’s Eurozone data has also failed to support the Euro so far. While Tuesday’s German trade surplus from March saw a solid improvement over February, Italy’s March retail sales disappointed.
Italian retail sales were projected to improve to 0.2% month-on-month in March but instead were stagnant at 0%. The previous figure was revised slightly higher from -0.3% to -0.2%. Year-on-year sales contracted at -0.4%, missing the forecast of a 0.8% improvement.
US Dollar (USD) Bolstered by Fed Bets
The US Dollar has seen an increase in demand since the Federal Reserve held its May policy meeting.
In the meeting, Fed officials stated that the US economic slowdown seen in Q1 2017 was likely temporary and displayed the intention to still hike US interest rates twice more this year.
As a result, June Fed rate hike bets soared. In the last week, June rate hike bets have climbed from below 70% to over 85%.
This week’s US data has also been generally optimistic and has given the ‘Greenback’ additional support. The Fed’s April labour market conditions index came in at 3.5 and the previous result was revised higher from 0.4 to 3.6.
Tuesday saw the publication of NFIB’s April business optimism report, which beat expectations of 104 by coming in at 104.5.
EUR/USD Forecast: Key Data Due Friday
The Euro to US Dollar exchange rate is unlikely to be heavily influenced by data for most of the week due to relatively quiet Eurozone and US economic calendars.
However, as investors continue digesting this week’s political news and the Euro selloff cools, EUR/USD could recover slightly before the end of the week.
Thursday’s session could also offer some support to the Euro. Ireland’s April inflation data may influence the Euro slightly, but investors are more likely to pay attention to the day’s European Central Bank (ECB) news.
As well as the ECB publishing its latest economic bulletin, Thursday will also see speeches from high ranking ECB officials Constâncio and Praet.
Friday’s session will follow with a slew of key data from both the Eurozone and the US. Eurozone data includes Germany’s preliminary Q1 Gross Domestic Product (GDP) results and Eurozone industrial production data for March.
The day’s US data includes April’s Consumer Price Index (CPI) results and retail sales stats. Michigan University will also publish its May consumer sentiment survey.