Euro Dollar Rate Today: Forecasts Suggest More EUR/USD Declines BUT EUR/GBP Could See Gains

There has however been relief for the euro against the British pound (GBP), the rally here could extend further in the near-term.

The euro dollar exchange rate (EUR/USD) is currently quoted at 1.3380, 0.21 pct lower on a day-to-day basis.

The euro to pound exchange rate meanwhile sits 0.02 pct higher at 0.7915.

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Euro dollar rate forecast: Further declines possible

The breaking of a key technical level has some analysts forecasting further declines from here.

Chris Beauchamp at IG tells us where he things the euro dollar rate is headed next:

"Markets have taken the drop through $1.35 for EUR/USD as the green light to sell more of the currency pair, with German IFO being a useful catalyst for those seeking a rationale.

"Consumer price index, manufacturing and unemployment data are on the calendar for this coming week, and will provide crucial newsflow to determine whether the euro can stage a rally against the US dollar.

"If it fails to rally, then the drop through the key 50-week moving average would continue to argue for a retest of the November 2013 levels around $1.3340."

Euro pound exchange rate: Could the relief rally continue?

2014 has gone the way of the pound sterling thanks to the outperformance of the UK economy over its continental majors.

The move lower in the euro pound exchange rate reflects the belief that the Bank of England will respond to this economic outperformance by raising interest rates in coming months.

Meanwhile, the European Central Bank is a long way off from raising its benchmark rate - this divergence in interest rates will ultimately keep the British pound bid higher against the euro.

However, the near-term could see a relief rally in the euro - the move higher in the pound has been relentless but we must allow for a decline in momentum.

Piet Lammens at KBC Markets also points out that there has been a softening in UK data recently:

"Of late, UK eco data were no longer unequivocally better than expected as was mostly the case earlier this year. The June UK retail sales confirmed this pattern.

"Sales grew a very meagre 0.1% M/M after a substantial decline in May. On Wednesday, EUR/GBP rebounded as the BoE minutes didn’t give any hints on the BoE policy intentions in the near future.

"This rebound was extended after yesterday’s disappointing UK retail sales. EUR/GBP filled offers just below 0.7940."

However, the long term forecast continues to favour the GBP over the EUR:

"There is no reason to go against the trend. We maintain our LT bullish view on sterling with EUR/GBP 0.7755 as a target.

"However, to set-up new long sterling positions we maintain a sell-on-upticks tactic for EUR/GBP."