Euro to US Dollar Exchange Rate Weakens Sharply

December 11, 2014 - Written by James Fuller

STORY LINK Euro to US Dollar Exchange Rate Weakens Sharply

Today's Euro Dollar News From Our Exchange Rate Analysts

The Euro weakened against the US Dollar as data out of Germany and France weighed on the single currency and as data out of the USA supported the ‘Greenback’. Increased expectations that the European Central Bank will introduce a sovereign quantitative easing programme and fears over a looming political crisis in Greece affected the Euro’s strength.

Data out of Germany showed that inflation in the Eurozone’s largest economy fell to its lowest level since February 2010. The final inflation readings matched economist expectations for a figure of 0.7%. A separate report from France meanwhile showed that inflation sank to a new five-year low by slipping to 0.4% in November. With both of the single currency blocs top two economies sliding further away from the ECB’s inflation target of 2%, fears are growing that the region is heading towards a disinflationary cycle.

Data out of Italy also disappointed as it showed that industrial production in the Eurozone’s third largest economy fell by a larger than forecast figure. On a year on year basis, production tumbled by -3.0% and on a monthly basis by -0.1%. Economists had been expecting production to fall by -2.3% annually and improve by 0.3% monthly.

Concerns over a growing political crisis in Greece, and growing expectations that the ECB could introduce a quantitative easing programme early next year also weighed upon the Euro.

As the session progressed, data was released in the USA, which sent the US Dollar soaring against the majority of its most traded peers. The currency rallied from sharp losses seen earlier in the week and advanced to fresh highs.

According to the Washington based Labour Department, the number of Americans filing for unemployment benefits fell to a three-week low as an improving economy slowed job losses. The report also shows that employers are retaining staff and hiring at the strongest pace since the late 1990’s.

Also supporting the US Dollar was a report, which showed that retail sales in the USA increased by their strongest level in eight months. Monthly retail sales increased from 0.4% to 0.7% and increased by 5.1% from 4.1% on an annual basis. The increase was said to be because of tumbling oil prices aiding consumer-spending power.

‘The consumer is doing pretty well. Any money consumers are saving from lower gasoline prices is being deployed elsewhere. The broad-based increase in sales is quite encouraging,’ said an economist from Jefferies LLC.
Further gains for the US Dollar are likely if Friday’s data releases weigh on the Euro.

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