Euro to Dollar (EUR/USD) Exchange Rate Today - Fresh One-Month Low on Dovish ECB

July 3, 2014 - Written by Frank Davies

STORY LINK Euro to Dollar (EUR/USD) Exchange Rate Today - Fresh One-Month Low on Dovish ECB

The Euro to Dollar (EUR/USD) Exchange Rate fell today to its lowest level in a month after European Central Bank President Mario Draghi was regarded as more dovish than expected and as US jobs data smashed economist expectations.

Early in Thursday’s session the Euro was softened against several of its major peers including the US Dollar as data showed that business activity in the Eurozone expanded by its slowest pace in six months in June.

Today's foreign exchange rates read as:

- The euro to pound exchange rate is -0.29 per cent lower at 0.79330 EUR/GBP.
- The euro to dollar exchange rate is -0.33 per cent lower at 1.36076 EUR/USD.

Some of the negativity of the data was countered however by the fact that new orders came in at their fastest pace in three years. That suggests that the figure will show signs of improvement in the second half of the year.

According to Markit’s Composite Purchasing Managers Index (PMI), activity across the region eased to 52.8 last month, down from the 53.5 figure recorded in May. The data was widely in line with economist expectations.

“At first glance, June’s PMI survey results make grim reading and raises worries that the Euro area’s recovery is already fading. Dig a little deeper, however, and there are grounds for optimism. With new orders rising at the fastest pace in three years, the pace of economic growth should also pick up again,” said Markit’s chief economist Chris Williamson.

EUR to Pound Edged Higher as Sterling Softened

The Euro (EUR) exchange rate then gained slightly against the Pound Sterling (GBP) as the UK currency was softened by a weaker than forecast Services PMI report.

As the session progressed into the afternoon the ECB announced its latest monetary policy stance. The Bank met economist expectations as it left interest rates on hold at the record low level of 0.15%.

It cited that it needed time to see if the extraordinary measures it introduced in June were working. Inflation rates will need to start to rise for there to be evidence of that.

The currency weakened against the Pound and other peers as ECB President Mario Draghi gave a rather dovish performance at the press conference which followed the rate decision. He said that he expects interest rates to remain low for an extended period and sees the Eurozone economy remaining under pressure for some time to come.

His comments highlighted the diverging policies of the Bank of England from the ECB. Whilst one is expected to raise rates soon as the UK economy continues to improve the other is keeping them low as the Eurozone stagnates.

The US Dollar then put the boot in after a report released by the Washington based Labour Department showed that US employers created 288,000 jobs in June, far more than the 215,000 forecast by economists. The USA’s unemployment rate also fell to 6.1% from 6.3% the lowest level seen in six years.

The US Dollar is Forecast to Strengthen

“The number is much stronger than expected, very encouraging, the Dollar is likely to rise across the board,” said the chief currency strategist at Westpac Banking Corp.

The strength given to the US Dollar from the payrolls data was short-lived against the Pound however as the Institute of Supply Management said that its non-manufacturing PMI fell from 56.3 in May to 56.0 last month. The figure was lower than economist expectations for an unchanged figure. As a result the Pound was able to pare its losses with the ‘Greenback’.

A separate report showed that the number of US Citizens filing making initial claims for unemployment benefits increased last week but the rise was not enough to dampen sentiment that the USA’s labour market is steadily improving. Initial claims increased by 2,000 last week.

The US markets will be closed on Friday for the country’s Fourth of July Independence Day celebrations.

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