Euro Rate Today: EUR Continues to Gain as Buyers Return, USD at Risk of FOMC Minutes Release

Euro exchange rates have started to climb back into contention once again as more buyers return to the market and pick up a discounted shared currency.

"EUR/USD rebounded from 1.25 to the 1.2570 area. Even so, the technical picture hasn’t really changed, especially not for EUR/USD," warns an exchange rate note from KBC Markets.

Indeed, as we hear below, and as we have warned here, the long-term outlook for the euro remains extremely challenging.

"Monday’s big 5.7 percent plunge in industrial orders and Tuesday’s 4 percent slide in factory output both were the most since 2009, showing an anticipated German recovery in Q3 slow to take shape," says Joe Manimbo at Western Union.

Today, we see the following rates of conversion:

• The euro to pound exchange rate is 0.26 pct higher at 0.7892.
• The euro to dollar exchange rate is 0.06 pct higher at 1.2676.
• The euro to Australian dollar rate is 0.84 pct higher at 1.4489.

Please note all the above rate are subject to a discretionary charge when delivered by your bank. This can drive costs up by 5%, find out how to minimise this exposure.

If you are looking for the best rate Don't Hesitate, ensure your FX provider has the correct stop-loss and buy orders ready, find out more.

USD Rally Catching Breath? FOMC Minutes Ahead

The EUR is off its lows, up 0.3%, as the market catches its breath after last week’s collapse to a multi‐year low of 1.2501.

Further buying interest in the euro dollar rate could emerge if the US Federal Reserve's minutes from their last meeting fail to indicate a 2015 interest rate rise has been brought forward.

We feel a dovish set of minutes could really undermine the USD following the strong run that has it at technical overbought levels.

European data has meanwhile been disappointing, with investor confidence falling, EU retail PMI down to 44.8, and a collapse in German factor orders; in politics, the EU is preparing to reject France’s budget.

"The euro clawed its way back from a two-year low against the greenback overnight as investors looked to cash in on the dollar’s historic 12-week rally. The move higher in the euro came despite news that German industrial orders plunged by the largest amount since 2009 in August," says Omer Esiner at Commonwealth Foreign Exchange.

Orders fell by 5.7%(m/m) in August, more than double the forecast for a decline of 2.5%(m/m). "It was the latest sign that Germany, the bloc’s largest economy and engine of broader growth is slowing and that the ECB will have to stimulate more if it hopes to avoid deflation and another all-out recession in the 18-member bloc," says Esiner.

Further Warnings of Euro Weakness

Longer term, we hear from Morgan Stanley that the euro is entering a new negative dynamic:

"We believe that the EUR regime has changed. From the second half of 2012 to the beginning of this year, no news was good news for EUR as financial inflows and central bank reserve diversification underpinned the currency.

"However, going forward, we believe that no news will be bad news for EUR and that EUR rallies will be limited unless accompanied by significant domestic upside surprise in Europe."

US Dollar Continues to Benefit from 40 Year Best

Esiner points out that the U.S. dollar rose for the 12th-straight week last week, a streak that goes back nearly 40 years to when the dollar was first floated from the gold standard.

"The dollar’s historic rally continues to be fueled by the notion that America’s economy is outpacing its major rivals and that the Federal Reserve will lead other major central banks in monetary policy normalization. The Fed is set to end its QE program of emergency bond purchases this month and is widely expected to begin raising rates in the first half of next year," says Esiner.

In contrast, the euro zone and Japan remain saddled with moribund economies and falling prices, which should force their respective central banks to ease monetary conditions further.

On Friday, the closely watched payrolls report for September showed stronger than expected jobs growth last month, a six-year low for the nation’s unemployment rate and importantly, that August’s very weak payrolls report was not nearly as weak as originally reported.

"While the forecasts for a stronger dollar will not come without occasional pullbacks and corrections, there is growing consensus that further broad-based gains for the greenback will continue over the long-term," says Esiner.