- Euro Gains, Deutsche Bank Crisis Over? – Media Speculate that DoJ fine will be significantly lowered.
- ECB Continues to Hold Interest Rates – As critics claim that the record low rates are ineffective.
- Trump Campaign Hit over Tax Allegations – Reports Claim Trump has not paid federal income tax in 18 years.
- US ISM Manufacturing Survey – Upbeat result could boost US Dollar
The EUR USD exchange rate bounced back late on Friday after media reports that the US Department of Justice would lower the fine levied against Deutsche Bank to $5.4billion.
Euro (EUR) Exchange Rates Recover as Deutsche Bank Shares Rally
Both the Euro US Dollar (EUR USD) and Euro Pound (EUR GBP) exchange rates firmed before the weekend.
Deutsche Bank share prices rallied late on Friday on the back of media reports that the DoJ would lower its fine for mis-selling Mortgage bonds a decade ago, from $14billion to $5.4billion.
The Euro had struggled for much of last week as it appeared that the Bank may have been unable to pay the fine amid low profitability, due to a prolonged period of low interest rates. This resulted in the bank discussing the sale of assets like its UK life insurance group Abbey Life.
There has yet to be any official statement form the DoJ regarding any reduction in the fine however, so the Euro US Dollar exchange rate’s recovery will likely be capped while investors wait for some concrete news.
ECB Stance on Interest Rates Could Weigh on Euro Forecast
The European Central Bank came under increased pressure over its policy of record low interest rates last week as Euro (EUR) exchange rates began to plummet due to the Deutsche Bank crisis, with President Mario Draghi facing fierce criticism as he met German politicians in the Bundestag last Wednesday at the height of the crisis.
However, reports on rising German inflation and Spanish consumer prices seem to prove that the ECB’s loose monetary policy is working. While Eurozone inflation is yet to hit the ECB’s 2% target the recent increases are promising and should support market confidence in the Euro.
US Dollar (USD) Could Strengthen over Trump Claims
While the Euro has been firming in response to the Deutsche Bank news, the US Dollar has found support from a political source – limiting EUR USD exchange rate gains.
The New York Times claims to have received some of Republican Presidential candidate Donald Trump’s tax documents from 1995, which appear to show that Trump has not paid federal income tax for the past 18 years after posting losses of $915million.
If true these reports could severely hurt the billionaire’s chances of getting into the Whitehouse as, despite not doing anything illegal, Trump has previously criticised others such as Barack Obama and Amazon CEO Jeff Bezos for not paying enough tax.
The US Dollar is likely to strengthen over the news, with a perceived win for Hilary Clinton being seen as a more stable bet for investors as they believe that she will not deviate wildly from current economic policies.
EUR USD Exchange Rate May Drop on ISM Manufacturing Report
US news is likely to be the next cause of EUR USD exchange rate movement.
The ISM Manufacturing Survey is due to be released later this evening, and is forecast to rise from a seven month low of 49.4 in August to 50.3 in September. This is good news for the US Dollar as it increases the likelihood of a December rate hike by the Federal Reserve, which conversely will help with the ECB plans to lower the value of the Euro and increase inflation.
The Markit Eurozone Manufacturing PMI data was uneventful however as it showed no change to the previous estimate of 52.6, providing little boost for the Euro.
Movement in the EUR USD exchange rate for the next couple of days will likely be related to the US election as there is a lack of significant data until Wednesday.
Current Exchange Rate
At the time of writing the EUR/USD exchange rate was trending around 1.1236 and the USD/EUR exchange rate was trending around 0.8903.