US Dollar SELLOFF - Euro to Dollar Exchange Rate and Pound Sterling Fall

Modified: Saturday, 4 October 2014 14:41 BST - Written by Frank Davies

STORY LINK US Dollar SELLOFF - Euro to Dollar Exchange Rate and Pound Sterling Fall

The Euro to US Dollar (EUR/USD) exchange rate trended higher on Thursday amid a busy day for both the Eurozone and US economies.

The Euro has fluctuated before and after European Central Bank President Mario Draghi’s speech, which detailed his stance toward monetary policy measures.

Thursday saw the central bank assert that it is to continue with the current low 0.05% interest rate after last month’s surprise cut. Economist Nick Matthews stated: No change but the focus for this meeting is not on interest rates but on the purchase programmes. Markets will be looking at all the details, particularly the minimum ratings for covered bonds and ABS [asset-backed securities].’

European Central Bank’s ABS Plans Outlined

The European Central Bank announced in June that it was planning to buy asset-backed securities later in 2014. Thursday has seen the ECB assert that it is to begin purchasing ABS in October and continue for two years. Draghi is attempting to boost the current two trillion Euro balance sheet by a further one trillion Euros. The ECB President has stated that ‘these purchases will have a sizeable impact on our balance sheet.’

The ABS program has been watched more closely by investors and economists alike recently following the flop of the ECB’s targeted long term refinancing operation (TLTRO). The European Central Bank appears to be running out of options for improving growth in the Eurozone. The current low value of the Euro in the market is speculated to be advantageous for the Euro bloc’s recovery, but far from enough to kick-start the 18-nation economy.

Moreover, Naples has seen unrest on Thursday as demonstrators gathered outside the Capodimonte Palace, where the European Central Bank was holding its bank-rate meeting. Demonstrators frustrated with the economic crisis and lack of growth in the Eurozone held banners protesting against the ECB, and were met by police and helicopters. Draghi commented in response to the demonstrations that the European Central Bank shouldn’t be labelled the bad guy. However, Draghi is under more pressure than ever to ensure the Eurozone expands with his view that the ‘Euro is irreversible’ within the financial system.

US Dollar Exchange Rate may see Stability from Unemployment Data


The US Dollar initially fell on Thursday from heightened speculation that it had gained too quickly with the US recovery still so uneven. However, Initial Jobless Claims saw less citizens applying for unemployemnt benefits, with only 287K applications. Furthermore, Continuing Claims fell lower than expected by coming in at 2398K – short of the 2425K forecast. Economist Guy Berger commented: ‘The low level of layoffs indicates demand for workers is solid.’

Friday will see the release of highly influential US Non-Farm Payrolls and Unemployment Rate figures, both of which have the potential to increase the ‘Buck’s’ exchange rate if favourable. In addition, US Average Hourly Earnings, Average Weekly Hours, Change in Household Employment, and Trade Balance statistics will also be revealed. In such a data-heavy day for the US, the ‘Greenback’ could recoup some of Thursday’s losses if data publications are upbeat. Meanwhile, the Eurozone’s most prominent data release on Friday will be Retail Sales figures which are expected to rise by only 0.1% in August, causing the annual figure to dip from 0.8% to 0.7%.

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