Euro to US Dollar (EUR/USD) Exchange Volatile before ECB decision

January 8, 2014

Frankfurt (Jan 8)  Surprisingly strong unemployment and retail sales figures for Germany hoisted the Euro higher against several of its major rivals during local trading, although gains were somewhat tempered by the news that the pace of inflation in the Eurozone slowed at the close of 2013.

As deflationary concerns could prompt the European Central Bank to introduce additional easing measures the news that the pace of inflation slowed from an annual rate of 0.9 per cent to 0.8 per cent is concerning.

While the Euro went on to edge lower against the US Dollar after figures revealed that the US trade deficit narrowed to an almost four-year low thanks to falling oil imports, remarks made by a Federal Reserve official turned the tables on the EUR/USD pairing once more.

Fed Bank of Boston President Eric Rosengren limited the appeal of the US Dollar as he asserted that the US economic recovery is failing to pick up at a reasonable pace.

Rosengren was against the Federal Reserve’s decision to taper bond buying and stated; ‘This recovery has already been too slow, and we do not want premature tightening of monetary policy to delay the return to more normal economic conditions. A very gradual normalisation is very appropriate given that the unemployment rate remains unusually high and the inflation rate remains unusually low.’

However, Rosengren did also comment; ‘I preferred to wait before beginning the program, but the program it looks like we’re embarked on is a very gradual program and I think a gradual removal of accommodation is appropriate’.

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