- EUR USD Rises amid Profit Taking – Investors cash in on the US Dollar’s recent gains.
- Draghi to Speak in Brussels – Euro may slide if further QE is Mentioned
- OCED Report May Weaken Euro – Predicts slide in Eurozone GDP next in 2017.
After ending last week’s session almost exactly where it began, the EUR USD exchange rate began rallying this morning as the US Dollar (USD) was weakened by profit taking.
Euro US Dollar (EUR USD) Rises, but Still close to Parity
The Euro US Dollar (EUR USD) exchange rate rallied this morning as markets sought to cash in on the ‘Greenback’s’ recent strength.
After an explosive rise in the two week’s following Donald Trump’s surprise victory in the US presidential elections, the US Dollar’s relentless march finally came to an end last week, causing a round of profit taking this morning as investors look to gain before the rising uncertainty of the Italian Referendum caused the Euro to drop.
The US Dollar has also suffered from Jill Stein’s call for a recount in Wisconsin, supported by the democrats, with the Green Party candidate possibility seeking further recounts in both Michigan and Pennsylvania.
The three states were key states in Trump’s election and although highly unlikely, the overturning of results in all three states would give the win to Democratic candidate Hillary Clinton.
Investors have reacted dovishly to the news as altering the outcome of the election would cause a great deal of uncertainty, with Trump likely to contest the results and prolong the process.
Quantitative Easing Remarks from Draghi could Weaken Euro
The Euro (EUR) may slide later this afternoon as European Central Bank President, Mario Draghi addresses the European Parliament in Brussels.
Draghi can expect some fierce criticism as he testifies before the Economic and Monetary Affairs committee as they quiz him on ‘Brexit’, Greece’s bailout and worries over the security of the Italian banking sector.
Investors will also be watching closely for any mention that the ECB will seek to extend its quantitative easing programme past March 2017, with any indication of further stimulus likely to weigh on the single currency.
OECD Economic Outlook Could See US Dollar Rise
The US Dollar may rise later today as the Organisation for Economic Co-operation and Development (OECD) predicts that Trump’s economic plans are likely to reflect well on US growth.
The OECD has predicted that US GDP will surge from 1.5% in 2016 to 2.3% in 2017 thanks to the president elect’s infrastructure plans.
Meanwhile, the OECD has forecast that the Eurozone’s GDP will slide from 1.7% to 1.6% in 2017. The OCED is concerned that low interest rates may cause advanced economies to become stuck in a low growth trap as Catherine Mann, chief economist of the OECD explains;
‘We are concerned about the extent to which asset prices are underpinned by low interest rates — so monetary policy has been over-burdened and there is now a premium on getting fiscal levers pulled in the right way.’
EUR USD Exchange Rate Forecast: German CPI Scheduled for Tuesday
The EUR USD exchange rate may rise tomorrow if Germany’s CPI data impresses. While current market forecasts predict that German inflation will hold at 0.8%, an unexpected rise is likely to improve Euro sentiment.
Meanwhile the US Dollar may be able to end its recent lull if Tuesday’s US Consumer Confidence report in proves as expected, with predictions that it will rise from 98.6 to 101.3 in November.
Current Interbank Exchange Rates
At the time of writing the EUR/USD exchange rate was trending around 1.06 and the USD/EUR exchange rate was trending around 0.94.