Euro dollar exchange rate: EUR/USD is an increasingly frustrating trade
- Written by: Gary Howes
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The euro exchange rate (EUR) complex is tipped to end the week on the front-foot; however the market remains incredibly hard to call.
"If EURUSD manages to stay better supported today and close out the week positively, it will be the first time since mid-December that there have been two consecutive weekly closes in the same direction," says Shaun Osborne at TD Securities.
The EUR/USD rallied sharply in today’s early European session as French and German GDP data beat expectations, driving the pair to a 3-week high above 1.3700.
A look at the euro exchange rate complex today shows:
- The euro dollar exchange rate is 0.16 pct higher at 1.3701. It is worth noting that this is a level that the currency pair failed to clear 3 times this year.
- The euro pound exchange rate is 0.19 pct lower at 0.8197.
- The euro Australian dollar exchange rate is 0.37 pct lower at 1.5179.
Note: All EUR quotes here refer to the wholesale spot market. Your bank will charge a spread at their discretion when passing on a retail rate. However, an independent FX provider is so well placed on the market that they are able to deliver you up to 5% more currency. Please learn more here.
Euro dollar exchange rate market hard to call
EUR/USD has been volatile but essentially trendless since late last year.
"The market has backed off the 1.38/1.39 peaks seen through thin, late year trading but the strong sense of a trend is still absent—and it is becoming a very frustrating trade for investors," says Osborne.
It remains to be seen whether developing issues, such as deteriorating Italian politics or the focus on declining inflation expectations in the Eurozone (if investors can yet look far enough ahead to the March ECB policy meetings when the next best chance of a policy adjustment probably resides despite this morning’s better than expected Eurozone GDP data) can shake the market out of this aimless trading environment.
GDP data gives Euro a boost
The EUR/USD rallied sharply in today’s early European session as French and German GDP data beat expectations, driving the pair to a 3-week high above 1.3700.
"The data release created a Bullish Marubozu Candle on the 4hr chart, showing strong buying pressure and foreshadowing a potential continuation to the topside. At this point, rates have broken the bearish channel that dated back to December (not shown) and rates may continue to rally toward the mid-January high at 1.3740 ahead of the weekend," says Matt Weller at GFT
The euro shrugged off political turmoil in Italy, which saw the nation’s Prime Minister resign yesterday, and instead focused on strong GDP reports for the fourth quarter to trade at a three-week high against the dollar. Germany’s economy, the largest in the euro zone, grew at a pace of 0.4%(q/q) in Q4, better than the 0.3%(q/q) expected.
France, the bloc’s number two economy and recent laggard, expanded at 0.3%(q/q), also better than expected. The stronger than expected growth across the euro zone saw the (then) 17 member bloc grow by a better than expected 0.3%(q/q).
The data could help reduce some pressure off of the ECB to ease monetary conditions in the near-term.
"Key for the euro will be the extent to which upcoming inflation data signals that price pressures are still depressed. Another cooler than expected CPI would quickly get the market to begin pricing in additional easing by the ECB," says Omer Esiner at Commonwealth Foreign Exchange.
