Euro Dollar Exchange Rate Forecast 2014: EUR/USD Could Fall to 1.2600 say Lloyds Banking Group

Ultimately though, it is the contrast between falling interest rates in the Eurozone, and expectations for rising interest rates in the UK and US that are likely to keep the shared currency under pressure.

On Wednesday we see the following day-on-day changes:

• The euro dollar exchange rate (EUR/USD) is 0.02 pct higher at 1.3549.
• The euro pound exchange rate (EUR/GBP) is 0.02 pct higher at 0.7987.
• The euro Canadian dollar exchange rate (EUR/CAD)  is 0.08 pct higher at 1.4730.
• The euro Aussie dollar rate (EUR/AUD) is 0.02 pct higher at 1.4514.

If you are holding out for better rates, or afraid of a further deterioration in the FX pair you are watching, then consider getting an independent FX firm to help set up a risk management strategy. They will also be able to deliver up to 5% more currency than your bank would typically deliver on execution.

Lloyds Bank Research forecast a lower Euro through remainder of 2014

What does the remainder of 2014 hold in store for the euro exchange rate complex? Lloyds Bank Research is one of those institutions backing further declines ahead.

In a foreign exchange forecast note to clients, the bank says:

"The ECB announced a package of measures at its June meeting, including taking its deposit rate into negative territory for the first time.

"However, the euro, which had been under selling pressure ahead of the press conference, largely recouped its losses after the ECB stopped short of outright QE.

"EUR/USD closed the day at 1.3637, after touching 1.3503 intraday. GBP/EUR spiked to 1.24 for the first time since December 2012 before falling back.

"Prospects for the euro are closely tied to the success of the new ECB measures. Euro area inflation slowed to 0.5% in May and
continuing softness would put pressure on the ECB to do more.

"The contrast with likely building speculation of interest rate hikes in the US in the year ahead is likely to weigh on euro crosses.

"However, there are underlying structural factors underpinning the euro. We forecast EUR/USD at 1.26 at end June 2015."

CFTC Commitments of Traders Report - Week Ending Tuesday, June 10th

Speculative investors and CTA-type accounts ramped-up their net long USD position during the week ended on June 10th, mostly to the detriment of the EUR and the JPY.  The latest Commitment of Traders Report shows that the overall change in positioning among major currencies led to an increase in implied USD net longs from US$6.6 billions to US$11 billions, the highest since March 4th

GBP experienced a minor net long extension, going from +35.0k to +35.8k contracts.  On the other hand, net NZD longs were scaled back modestly to 16.9k from +17.5k.

Similar to the changes observed in the previous week, the largest moves were registered in EUR and JPY positioning, with both currencies seeing sizeable net short extensions.  Net EUR shorts went from -33.0k contracts to -57.2k, while net JPY shorts were extended from –74.2k contracts to -82.2k contracts.