EUR/USD Exchange Rate Muted as Markets Await ECB Rate Decision
The Euro to US Dollar (EUR/USD) exchange rate traded close to a two-week low on Wednesday morning as markets remained cautious ahead of the conclusion of the European Central Bank’s (ECB) latest policy meeting.
At the time of writing the EUR/USD exchange rate was virtually unchanged, leaving the pairing at $1.1303 – just shy of a two-week low.
Euro (EUR) Exchange Rate Stalls: All Eyes on the ECB
The Euro (EUR) remains on the back foot against the US Dollar (USD) and the majority of its other peers this morning as investors continue to steer clear of the single currency ahead of the ECB’s upcoming rate decision.
The ECB will conclude its March policy meeting on Thursday, and while economists are not expecting any policy changes from the bank this month, markets are bracing for some volatility in the Euro tomorrow amid suggestions the bank will need to sideline plans to tighten monetary policy this year.
ECB President Mario Draghi previously signalled that he would leave rates on hold throughout the summer, with the aim being to begin hiking rates at the tail end of 2019.
However, deteriorating global economic conditions and what looks to be a prolonged slowdown in the Eurozone has cast a shadow over the bloc in recent months.
This has resulted in speculation that the ECB will alter its guidance this month, likely delaying plans for a hike until at least 2020 and sending the Euro lower.
EUR investors are also likely to pay particular attention to the ECB’s economic forecasts, with analysts predicting that the bank will move to slash growth and inflation expectations in light of stalled momentum in Germany and a recession in Italy.
EUR/USD Exchange Rate Forecast: Will US Trade Data Drag on USD?
Looking ahead, the main catalyst of movement in the Euro US Dollar (EUR/USD) exchange rate will undoubtedly be the ECB’s rate decision on Thursday.
This is likely to limit the appeal of the Euro throughout the mid-week, with EUR investors likely to be hesitant about making any moves before digesting the ECB’s latest policy statement.
In the meantime however, markets are likely to be focused on the release of the latest US trade balance figures later afternoon, with the US Dollar potentially slipping if the domestic trade deficit surged in line with expectations in December.
Alongside this will be the release of the latest US ADP employment data. Often used as an early indicator for the more influential non-farm payroll figures, this could see more pressure placed on USD if a drop in ADP employment growth last month further dampens expectations for Friday’s data.