Euro to US Dollar Exchange Rate Reaches Fresh 3-Year High

US Treasury Welcomes USD Weakness Causing Euro to US Dollar Exchange Rate Gains

Due to the broad bearishness of US Dollar trade in recent sessions, the Euro to US Dollar (EUR/USD) exchange rate has continued to climb, hitting a new three-year-high on Thursday morning before slipping back.

EUR/USD opened this week at the interbank level of 1.22 and has since climbed to above 1.24. This means EUR/USD is currently trending near its best levels since December 2014.

The latest bout of US Dollar (USD) weakness has come as a result of comments made by US Treasury Secretary Stephen Mnuchin, at the World Economic Forum (WEF) in Davos this week.

Following recent US Dollar weakness on the back of the White House’s rumoured plans to ramp up protectionist trade policies, investors were shocked to hear that Mnuchin was welcoming the recent US Dollar losses.

According to Sireen Harajli, foreign exchange strategist at Mizuho:

‘It’s quite significant given that this is the first time

Euro (EUR) Exchange Rate Advances Supported by Markit’s PMI Projections

Despite a raft of recent positive Eurozone data, Euro (EUR) gains against the US Dollar have been limited by European Central Bank (ECB) uncertainty.

Wednesday saw the publication of Markit’s January PMI projections for major Eurozone members and the Eurozone as a whole.

Manufacturing in France, Germany and the overall bloc is now projected to have done slightly worse than economists expected in January. On the other hand, manufacturing is still projected to come in at an impressive 61.2 in Germany and 59.6 in the Eurozone as a whole.

The bloc’s service sector also looks to be on track to outperform expectations, coming in at 57 in Germany and 57.6 for the Eurozone.

Overall, January’s Eurozone composite PMI is now projected to rise from 58.1 to 58.6, which would beat expectations of slipping to 57.9. The report indicated that Eurozone economic growth was continuing to strengthen at the start of 2018.

US Dollar (USD) Exchange Rates Fall on Mixed Data

While Markit’s US manufacturing PMI projections beat expectations of 55 on Wednesday, rising from 55.1 to 55.5, the day’s other data was underwhelming and didn’t give investors much reason to buy the US Dollar.

Markit’s services projection for January slipped from 53.7 to 53.3, rather than rising to 54 as had been expected.

US existing homes sales were disappointing, coming in with at even lower than the forecast at -3.6% month-on-month and an overall figure of 5.57m.

On top of this mixed US data, investors are hesitant to buy the US Dollar while the Federal Reserve’s 2018 monetary policy outlook remains uncertain.

Euro to US Dollar (EUR/USD) Forecast: ECB News and US Growth to Drive Movement

Euro to US Dollar (EUR/USD) investors will be spending much of Thursday and Friday’s sessions reacting to the perceived tone of the European Central Bank’s (ECB) January policy decision.

If the bank’s tone is perceived as hinting it will take a more hawkish tone in the coming months, the Euro could continue its climb against the US Dollar.

Besides the ECB news however, EUR/USD is likely to be driven by US news and the strength of the US Dollar.

Will the US Dollar’s recent bearish run continue? It is likely USD will see further weakness before the end of the week if Friday’s key US Gross Domestic Product (GDP) results fall short of expectations.

US growth is expected to have slowed slightly from 3.2% to 3% quarter-on-quarter, but if the projection comes in lower than expected investors may continue to sell the US Dollar.

On the other hand, if the US growth projection beats expectations it’s possible the US Dollar could rebound slightly from its recent lows, leading to a rise in Fed rate hike bets.

Josh Ferry Woodard

After leaving university in 2011 Josh briefly worked as a currency analyst in the South West of Cornwall. Josh continued monitoring the currency markets and publishing exchange rate analysis after moving to London in 2012, with a particular focus on the impact of economic and political stimuli on forex. Josh was a regular contributor to The Telegraph’s weekly currency feature for several years.

Contact Josh Ferry Woodard