EUR/USD Exchange Rate Claws Back Losses
The Euro to US Dollar (EUR/USD) exchange rate is edging higher today on suggestions the pairing may have been oversold following last week’s US retail sales figures.
At the time of writing the EUR/USD exchange rate is up nearly 0.3% this afternoon, taking the pairing to around $1.1238.
Euro (EUR) Exchange Rates to Weaken on Draghi Speech?
While the Euro (EUR) is currently ticking higher against the US Dollar (USD) and most of its other peers, the start of the European Central Bank’s (ECB) annual forum in Sintra, Portugal, could throw a spanner in the works.
Previous years have seen the event drive movement in the single currency as seen in 2019 when the Euro surged following ECB President Mario Draghi’s remark that the ‘threat of deflation is gone’.
However this year’s event is more likely to prove negative for the Euro as the list of talking points include the gloomy global economic outlook, weak Eurozone inflation and potential plans to implement further monetary stimulus.
With this in mind Euro (EUR) exchange rate investors are likely to keep a close eye on a number of speeches being made by Draghi throughout the week, with his introductory remarks on Tuesday morning likely to be under particularly close scrutiny for any hints at the ECB’s plans for the coming year.
US Dollar (USD) Exchange Rates Pressured by Poor US Manufacturing Data
Meanwhile, US Dollar (USD) exchange rates find themselves on the defensive this afternoon, following the publication of the latest Empire State Manufacturing index.
According to data published by the New York Federal Reserve, factory activity in the region contracted sharply in May, with the index plummeting from 17.8 to -8.6 – falling well short of expectations of a modest slowdown to 10.
This was the lowest reading since October 2016 and resulted in a pullback in US Dollar (USD) exchange rates as it added to signs that US growth is slowing.
Euro to US Dollar (EUR/USD) Exchange Rate Forecast: Dovish Fed to Soften the US Dollar?
Looking ahead, movement in the Euro US Dollar (EUR/USD) exchange rate this week is likely to be driven by the Federal Reserve’s June policy meeting, which will conclude on Wednesday.
While no policy changes are expected from the Fed this month, there has been considerable speculation in recent weeks that the bank will be forced to lower interest rates later in the year.
If the bank’s forward guidance points to a rate cut in the coming months this could result in US Dollar exchange rates facing some pressure in the mid-week, although analysts have suggested that the cut is already priced in so any movement in USD may prove negligible.
In the meantime, the Euro to US Dollar (EUR/USD) exchange rate may come under pressure on Tuesday following the publication of ZEW’s latest Eurozone Economic Sentiment index, which is likely to show that confidence in the bloc continued to deteriorate this month.