Currency analysis: US DOLLAR
Key economic
indicators
Actual
Trend
Central bank sentiment
0.25%
Likely to increase gradually later in 2015
Gross domestic product
2.7%
Likely to hold – possibly strengthen further
Consumer Price Index
1.8%
Likely to reach targeted 2%
Unemployment rate
5.4%
Likely to increase to target 6% level
Trade balance
-51.37bn
Deficit likely to widen
Currency trend: EURUSD
Insight
Ever since the European Central Bank (ECB) kicked off its stimulus programme of quantitative easing (QE), which
has led to better economic data and growth in the Eurozone, the euro has performed quite steadily against the US
dollar. However, a negotiation over Greece’s debt crisis continues to be a thorn in the euro’s flesh. Given
negotiations are still in progress, the outcome on the decision to bailout Greece could bring further volatility for the
euro – though barring a few blips, the single currency has managed to stay above the 1.10 level against the
Greenback.
Better than expected manufacturing and export data from the larger Eurozone economies (Germany, France and
Spain) made for a rather robust euro through April and May. EURUSD also starts June quite strongly at 1.1135, as
markets are inclined to believe in the possibility of a Greek deal and the avoidance of a Grexit.
Divergent monetary policies are having a clear impact on the world economy. Markets and investors alike seem to
have accepted that the US will increase interest rates in 2015, after a somewhat hawkish Federal Reserve Chair,
Janet Yellen, reiterated the consideration at the last Federal Reserve meeting.
The euro could come in for further weakness later this year for two main reasons. The first would be better sets of
economic data from the US, leading to an interest rate rise. The second is the ECB’s intent to fully implement the
roughly €1.1 trillion QE programme until inflation gets to the targeted 2% level.
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