EUR/USD Exchange Rate Steadies Following Losses
The Euro to US Dollar (EUR/USD) exchange rate is holding steady this morning after slipping from a one-week high yesterday evening following the Federal Reserve’s policy meeting.
At the time of writing the EUR/USD exchange rate is virtually unchanged this morning, but is trading around half a cent below the week’s best levels at $1.1212 on the inter-bank market.
US Dollar (USD) Rallies as Fed Quashes Rate Cut Speculation
While still on the back foot against the Euro (EUR) this week, the US Dollar (USD) bounced back from its worst levels late on Wednesday in the wake of the Federal Reserve’s latest policy decision.
Unsurprisingly the Fed voted to leave interest rates on hold again this month as it reaffirmed its commitment to remaining ‘patient’ with monetary policy this year.
Commenting on the outlook for Interest rates, Fed Chair Jerome Powell, said: ‘We do think our policy stance is appropriate right now. We don’t see a strong case for moving in either direction.’
This appeared to quell recent concerns that a rate cut could be on the table for the Fed this year, helping the US Dollar to pare some of its losses yesterday evening.
Westpac Bank’s FX strategy team said:
‘Markets did not get hints of possible rate cuts from the Fed, causing US bond yields and the US Dollar to rise in response.
‘While the Fed reiterated their non-committal pledge to remain ‘patient’, the broader narrative is more optimistic and not consistent with market pricing for two Fed cuts by the end of 2020.’
The Fed’s wider outlook for the US economy also lent support to USD exchange rates on Wednesday, with Powell forecasting the recent slowdown in inflation is likely to be temporary.
Euro (EUR) Exchange Rate Muted Following Contraction in German Retail Sales
Meanwhile the Euro (EUR) is trading in a narrow range this morning, following the publication of Germany’s retail sales figures.
According to data published by federal statistics agency Destatis, retail sales growth were reported to have contracted -0.2% in March, down from 0.5% growth the previous month, just beating expectations of a -0.4% drop.
Destatis reported the contraction was mostly due to sharp drops in sales of food, drink and tobacco, driving in part by the later timing of Easter this year.
EUR/USD Exchange Rate Forecast: US Payrolls to Surprise in April?
Looking ahead, trade in the Euro US Dollar (EUR/USD) exchange rate is likely to remain busy right up to the end of the session, with the publication of US non-farm payrolls on Friday afternoon likely to act as a major catalyst of movement.
Economists previously forecast that payrolls numbers would see a modest decline in April, sliding from 196,000 to 185,000.
However following on from a bumper ADP employment report earlier in the week, some economists are now more upbeat, with the US Dollar likely to surge if Non-Farm Payrolls show a similarly impressive increase.
In the meantime the publication of the Eurozone Consumer Price Index may offer some support for the Euro tomorrow morning as economists expect it will show core inflation in the bloc picked back up last month, rebounding from 0.8% to 1%.