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Euro Dollar Today: EUR/USD Exchange Rate Weaker on US GDP and German Inflation Data

October 30, 2014 - Written by David Woodsmith

The Euro to Dollar exchange rate (EUR/USD) weakened after data out of German heightened fears that the Eurozone is sliding closer towards deflation and a report showed that the US economy expanded at a stronger than forecast rate in the third quarter of the year.



eur usd forecastThe US Dollar to euro exchange rate (USD/EUR) strengthened after data released by the Washington based Commerce Department showed that the world’s largest economy expanded more than expected in the third quarter of 2014.

Gross Domestic Product (GDP) expanded by an annual rate of 3.5%, beating forecasts for a figure of 3%.

The Pound to US Dollar exchange rate is +0.13 pct higher with a conversion rate of 1 GBP equals 1.60244 USD.
The Euro to US Dollar conversion rate is -0.08 pct lower at 1.26223 EUR/USD.
The Swiss Franc to US Dollar exchange rate is -0.03 pct lower at 1.04695 CHF/USD.

The cause of the bigger than expected increase was an increase in military spending because of US air strikes in Iraq and Syria against the barbarous Islamic State and a shrinking of the nation’s trade deficit. The economy slowed from the preceding figure of 4.6% but that was widely predicted due to the general slowdown of the wider global economy. The 3.5% increase caps the best six months in over a decade.

‘The economy is on a firm footing, and if the labour market continues to get better that’s the primary support to consumer spending. The demand side of the equation was very healthy in the third quarter,’ said Brian Jones, economist at Societe Generale.

Also supporting the US Dollar was the hawkish statement released by the Federal Reserve at the conclusion of its two-day long policy meeting. Policy makers were optimistic over the strength of the nation’s labour market and pushed ahead with ending the monthly quantitative easing programme.

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With the Federal Reserve tightening monetary policy the US Dollar looks set to rise further as the policy is a divergence from those of the central banks in Sweden and the Eurozone.

The Euro was weakened by a report, which showed that inflation in Germany fell again by -0.3% on a monthly basis and remained at the ultra low level of 0.8% on a yearly basis. The data did little to ease concerns that the single currency region is sliding closer towards deflation. A separate report showed that Spain is already suffering from its ill effects.

Greece also weighed on sentiment towards the Euro as the Greek Minister of Administrative Reform warned that there would be turbulence in the country’s political scene ahead of February’s Presidential elections. The anti-bailout SYRIZA party is likely to force a snap general election and investors are nervous that it could win the vote.

“The reality is that there will be a climate of uncertainty until February,” Mitsotakis, 46, said. “Volatility is caused by the fear of snap elections and the possibility that these will be won by a party which is not normal.”

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