Euro exchange rate today: EUR/USD cracks through 1.3 but UBS look for stabilisation at current levels

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Published on Friday, 14 September 2012 09:17

Written by Will Peters

The euro (Currency:EUR) is looking supreme once more this morning: the euro dollar exchange rate is 0.33 pct higher than at Thursday night's close, EUR/USD is at 1.3031.

The euro pound exchange rate has also advanced, but sterling is no under-performer this morning and hence EUR/GBP is just 0.1 pct higher at 0.8048.

"We see scope for stabilisation at these levels however, given the dollar has already sold-off quite sharply since the August payrolls report," advises Gareth Berry at UBS.

The outlook for the dollar is likely to be driven increasingly by data releases it has been suggested as the US Fed places a significant degree of focus on this economic indicator.

Berry says:

"The fed funds rate guidance was also extended to mid-2015 and Operation Twist will continue as before. Although MBS purchases will be conducted at the moderate pace of $40 bn per month, the program is open-ended and so has the potential to become very large. The intention is to persist until the outlook for the labour market “improves”.

"Consequently, the dollar’s sensitivity to employment-related data releases is likely to increase significantly in future."

Fed forecasts for unemployment rate, however, remained hardly changed at 7.6% to 7.9%.

Turning to the Eurozone, ECB President Draghi expressed satisfaction with how the market has reacted to the ECB’s new bond buying plan.

Interviewed in Sueddeutsche Zeitung he said:

 “There have already been positive results...The announcement of the facility has contributed to raising confidence in the euro area, and in the euro across the world...Fund managers are bringing their money back to Europe”.

Draghi went on to say that he was against the idea of the ECB accepting a haircut on its Greek debt holdings acquired through the original SMP program.

An IMF official noted that Greece will not be able to fill the funding gap on its own and said the country will need a third
bailout.

He added that it is up to the EU and the ECB to “find money for Greece”. News reports suggested that Greece was able to meet only 22% of targets for the second bailout.

Greece Finance Minister Stournaras refuted the report saying “there was never a discussion or reference to a third bailout program”.