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Euro to Dollar Exchange Rate: EUR/USD Avoids Tumbling Back to Last Week?s Yearly Lows

March 11, 2019 - Written by David Woodsmith

Despite a lack of fresh strong support for the Euro since last week’s surprisingly dovish European Central Bank (ECB) decision, the Euro to US Dollar (EUR/USD) exchange rate has avoided further losses today. Investors were hesitant to sell the Euro to its worst levels amid speculation that the Eurozone could be about to see something of a turnaround.

Weak Eurozone data and ECB dovishness dragged EUR/USD over a cent lower from last week’s opening levels of 1.1368. In fact, EUR/USD briefly touched on a yearly low of 1.1183 on Thursday – the worst level for the pair since 2017.

After that, EUR/USD rebounded slightly and closed the week near the level of 1.1235. The pair remained resilient on Monday and trended closely to the level of 1.1240 at the time of writing today.

Today’s German trade data, as well as rising speculation that the worst of the Euro’s performance may be behind it, helped the Euro to hold its ground.

However, the US Dollar remains appealing despite some underwhelming US data in recent sessions, thanks to the overall solid US economic outlook.

EUR Exchange Rates May Have Hit a Low Point

Speculation has risen over the past week that the Eurozone’s economic outlook is showing more optimistic signs following an economic slowdown that lasted longer than analysts expected it would.

Could the Euro itself be about to rebound from its worst levels as well?

Demand for the shared currency was buoyed today, amid a lack of fresh market reasons to sell the currency further, as well as speculation that the bearish bets against the currency may have hit a bottom.

Bets against the Euro recently hit their worst levels since December 2016, and analysts are speculating that if the Euro isn’t in for more losses the currency could be in for a slight recovery.

According to Valentin Marinov, Head of Currency Strategy at Credit Agricole SA:

‘Excessive market shorts do highlight that we may be getting closer to a turning point,

To have a real turnaround in the Euro, however, we would need more tangible evidence of an economic turnaround in the Eurozone. Calling the bottom of the latest Euro selloff has proved to be very challenging.’

Essentially, without much reason to sell the Euro further, Euro investors are highly anticipating further evidence that the Eurozone’s economic activity is starting to see an improvement from the recent slowdown.

USD Exchange Rate Strength Limited as US Retail Slumped over Holiday Season

Despite the importance of retail activity over the winter holiday period, the US retail sector reportedly slumped even further than expected in December.

According to January’s US retail sales results, published this afternoon, the US retail sector just hasn’t been as buoyant as hoped in recent months.

While monthly retail sales improved to a better than expected 0.2% in January, investors were concerned that December’s print had been revised lower from -1.2% to -1.6%.

December’s year-on-year figure was revised lower as well, from 2.3% to just 1.6%.

As a result of the concerning December retail sales data, the US Dollar slipped today despite US business inventories meeting expectations.

According to analysts from Capital Economics, weak car sales were partially to blame for holding back US retail activity:

‘The modest 0.2% m/m gain in headline retail sales was partly due to a 2.4% m/m drop in motor vehicle sales. Unfortunately, the manufacturers’ data show that sales fell further in February.’

EUR/USD Exchange Rate Forecast: US Inflation Due Today

As recent US data is showing signs of slowdown, the Euro to US Dollar exchange rate could be in for further gains if upcoming US data disappoints investors as well.

No notable Eurozone data will be published tomorrow, leaving Euro to US Dollar exchange rate investors to react to US data, as well as any other news that could influence market sentiment.

The biggest US data of the day will be February’s US Consumer Price Index (CPI) inflation rate report, which is expected to have improved just slightly since January.

If US inflation beats forecasts though, it could drag EUR/USD lower as the US Dollar strengthens.

If tomorrow’s Brexit news shocks investors, this could also drive EUR/USD lower as it would cause stronger market demand for safe haven currencies.

The Euro could react to Brexit news tomorrow, but Wednesday’s industrial production stats are more likely to directly influence the Euro to US Dollar (EUR/USD) exchange rate.
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