Euro Dollar Exchange Rate Forecasts 2015: EUR Gains May Still Lie Ahead Says Analyst

The call comes after a soft patch for the shared currency following the June interest rate cut at the European Central Bank. However, 2014 has for the most part gone the way of the shared currency and trend momentum remains positive longer-term.

According to analysts at BMO Capital a lack of stimulatory action by the ECB, who are left with little room within which to manoeuvre, will ultimately see the EUR supported.

It is the fear of further ECB action that has kept a lid on the shared currency in recent times, should this fear be removed then we could well see the euro rise.

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Furthermore, low-yields globally will ensure peripheral Eurozone bonds are receivers of funds as traders deploy a ‘buys on dips’ strategy and on a wider cross currency basis this is expected to reduce EUR-negative outflows.

From a trade-weighted perspective the EUR (ex-USD) is believed to be strong, "EURUSD strength not simply due to a weak USD," say analysts.

Germany’s trade surplus with the Euro Area has ceased deteriorating and this should ensure the Balance of Payments book is to remain strong, a boon for those hoping for stronger euro exchange rates.

From here, analysts at BMO see 1.3450-1.3500 as the base in EURUSD and look for the pair to challenge the 1.3700-1.3900 range (3-6m).

Euro struggles on soft data, banking crisis fears

Despite predictions for a recovering euro, we note that at present the shared currency remains under pressure.

The euro struggled this week, falling to a 1 month low against the US dollar and dropping to the lowest point against sterling since the summer of 2012.

"Fears escalated that we could be headed for a banking crisis in Portugal on Tuesday as a proportion of a €900million debt related to Banco Espirito Santo went unpaid; however, since then these fears have subsided. On the data front, worse-than-expected Industrial Production data combined with a poor German ZEW Economic Sentiment survey which came out at the lowest level since 2012 did little to help the euros slump," says Carl Hasty at Smart Currency Business.

Mario Draghi was speaking on Monday and stated that he felt a strong euro could put the Eurozone’s economic recovery at risk; however, he also made clear that the European Central Bank (ECB) does not have an exchange rate policy.

Monthly Consumer Price Index (CPI) figures released yesterday showed the euro area annual inflation was at 0.5%. Inflation in the eurozone remains worryingly low, much lower than the ECB’s 2% target, what is more, the ECB stated that if inflation remains low they would look to embark on a quantitative easing programme to support the Eurozone’s economy.

It’s a quiet day on the data-front in Europe; but any comments from the President of the German central bank could cause a reaction in the markets.

"If you are looking to buy or sell euros, we suggest contacting your trader now for live rates, news and currency-purchasing strategies," says Hasty.