Euro Pound Exchange Rate Recovers BUT Euro Dollar Rates Still Under Pressure, EUR/USD at 8 Month Lows

Indeed, one currency market analyst we follow has labelled recent euro weakness as bizarre.

"The euro fell to an 8 month low against the U.S. dollar for no specific reason and that makes us extremely skeptical of the sustainability of EUR/USD's decline," says Kathy Lien at BK Asset Management.

At the time of writing the following EUR rates are noted:

  • Euro dollar exchange rate: 0.08 pct lower at 1.3452.
  • Euro pound exchange rate: 0.02 pct higher at 0.7927. The GBP has failed to take strength from Friday's good GDP data.
  • Euro Aus dollar exchange rate: 0.04 pct higher at 1.4302.
  • Euro NZ dollar rate: 0.27 pct higher at 1.5753.
  • Euro CAD dollar rate: 0.04 pct up at 1.4470.

(Note: If you are hoping for a better exchange rate then don't hesitate, ensure your currency provider has the relevant stop-losses or buy orders in place. An independent FX provider could also execute your transaction at rates that can be up to 5% more beneficial than the rates offered by your bank. Find out more.)

Euro Pound Outlook: More Gains?

Concerning the euro pound's outlook, Shaun Osborne at TD Securities warns, "disappointing UK retail sales have weighed on the GBP modestly and we think EURGBP risks rallying a little more near-term."

Ipek Ozkardeskaya at Swissquote Bank also says the euro could now be recovering:

"EUR/GBP recovered to 0.79236 post data. Trend and momentum indicators are marginally bullish after rebound from the year low of 0.78748 hit on July 23rd. Offers pre-21 dma (currently at 0.79416) should limit the rallies.

Euro hits 8 month low against US dollar - Will it go lower?

The euro is at its cheapest level against the US dollar for over 8 months and Kathy Lien at BK Asset Management reckons it may not offer such good value for too much longer.

According to Lien:

"In the short term, the conflict between Israel and Gaza as well as the ongoing investigation into flight MH17 is a big focus of the global community but for investors, the rebound in the Dow and the decline in VIX indicate that the uncertainty has not translated into increased concerns for market participants.  

"In other words, we can't necessarily blame the decline in the euro on tensions with Russia. In fact, EU ministers failed to agree on new economic sanctions at today's meeting in Brussels.  The only agreement was for visa bans and asset freezes on more Russian officials.

"While a weak response from the EU was widely expected, it should have been positive and not negative for the euro because of the lower risk that it poses to the Eurozone economy.  At the same time, no economic reports were released from the region and the German-US yield spread moved in favor of the euro.

"The only explanation for the sell-off in EUR/USD is a technical one. The currency pair has been in a downtrend and hovering near 1.35 for the past few days with speculators itching to test this key support level.  

"Expectations for a weaker PMI and IFO report may have also contributed to the move but these reports are not expected until Thursday.  In the long run, we believe EUR/USD should be trading comfortably below 1.35, but not until there is significant upside momentum in U.S. yields.  The last time EUR/USD was this weak was when the European Central Bank surprised the market with a 25bp rate cut."

Since the risk of further easing from the ECB right now is low we believe that EUR/USD won't spend much time below 1.35 suggests the analyst.

Weakness to extend warn Swissquote

While BK Asset Management are betting on a recovery in the euro you won't be hard pressed to find those who are predicting further declines.

We may have the best euro exchange rate on offer in many months right now, but better rates could lie around the corner.

According to Ipek Ozkardeskaya at Swissquote Research:

"The market reaction to soft US inflation reading has been somewhat interesting in EUR/USD. The US CPI ex-food and energy accelerated at the slower pace of 0.1% in month to June (vs. 0.2% exp. & 0.3% last), the CPI y/y (ex-food & energy) retreated to 1.9%. The G10 gave mixed reaction: USD sold-off against the antipodeans and the yen, yet gained versus EUR, GBP and CHF.

"The heavy selling pressures on EUR finally broke EUR/USD support at 1.3477 (former year-to-data low), taking the pair down to 1.3455 in the continuation of long-liquidation. Both technicals and fundamentals suggest the extension of softness moving forward. The next key support is placed at a distant 1.3296 (Nov 7th 2013 low).

"The weakness in EUR/USD helps EUR/CHF holding ground. EUR/CHF hovers around its 21-dma (1.21500), ready to test May-July downtrend channel top (today at 1.21570). Important resistance is seen at this level, reinforced by decent option barriers in today’s expiry.

"Intensifying selling pressures in EUR/USD should keep the downside safe above 1.21350 (2-week ascending channel bottom) given the significant negative correlation between EUR/USD and EUR/CHF. The 40-day trailing correlation stands at -43% today."