EUR/USD ? ECB Boosts Euro, US Jobs Report to Trigger Exchange Rate Movement

At the close of a fairly eventful week for the currency market, the Euro to US Dollar (EUR/USD) exchange rate is trading in the region of 1.2365, down slightly on the Friday’s opening levels. Over the last five days the Euro to US Dollar exchange rate has moved between highs of 1.25 and lows of 1.23 as economists responded to mixed data from the US and developments in the Eurozone. While a run of disappointing manufacturing/services figures for the Eurozone and its largest economies piled pressure on the Euro, the US Dollar also experienced fluctuations as a result of mixed non-manufacturing figures, a below-forecast ADP employment change report and a higher than expected level of initial jobless claims. On Thursday the EUR/USD exchange rate was able to gain as a result of the European Central Bank’s interest rate announcement.

While the majority of industry experts predicted inaction from the central bank, a proportion did expect the ECB to roll out additional stimulus to defend against the threats of deflation, triple-dip recession and the slowdown in Germany. As the rolling out of full-scale quantitative easing would devalue the Euro, the fact that no changes were made to policy gave the common currency a boost. The central bank did indicate, however, that it is prepared to take action at the beginning of 2015. In the view of economist Carsten Brzeski; ‘The scene is clearly set for QE. The continued emphasising of low inflation will make it very hard for even the purest Germanic monetarists to eventually block QE.’ Similarly, industry expert Fabian Eliasson observed; ‘They have a broad-based package for January – that’s significant news. The question is how efficient it’s going to be. I want to see what the package is before shorting Euro’.

Before the weekend the EUR/USD exchange rate could experience volatility as a result of the US Non-Farm Payrolls figure. As this week’s ADP Employment Change report fell short, showing a jobs gain of 208,000 rather than the 222,000 expected, there is a possibility that today’s NFP could also disappoint. It is expected that the highly influential report will reveal jobs growth of 230,000. Any figure over 200,000 is encouraging and could prompt the Federal Reserve to consider increasing interest rates sooner than currently forecast. However, a figure below 200,000 would pile pressure on the US Dollar and could see the EUR/USD exchange rate climb. Investors with an interest in the EUR/USD pairing will also be looking ahead to next week and the publication of German trade data and the US Advance Retail Sales report.