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EUR USD Exchange Rates Inch Ahead before Trump’s Fed Chairman Decision

  • EUR USD Hits 1.1672 – USD EUR Slips to 0.8597
  • Fed Chairman Decision Looms – USD Bearish Before Announcement
  • Eurozone Data Mixed – Euro Exchange Rates Limited

The Euro US Dollar (EUR USD) exchange rate inched ahead today as markets prepared for US President Donald Trump’s announcement regarding who will be replacing Janet Yellen as Federal Reserve Chairman.

Eurozone Data Proves Positive – EUR Exchange Rates Limited

Data in the Eurozone today was mostly positive, with the seasonally adjusted harmonised reading of unemployment in Germany remaining at 3.6% in September – unchanged from August’s 37-year low.

The Markit manufacturing PMI for the Euro Area, however, printed at 58.5 in October, above September’s 58.1 but below the forecast of 58.6.

Despite coming in below expectations, the print still remains strong, with the Eurozone’s economy continuing to demonstrate signs of recovery (any figure above 50 demonstrates growth).

This news did little to bolster the Euro, however, with EUR USD remaining predominantly bearish in the build-up to today’s Fed Chairman announcement.

USD Exchange Rates Subdued, FOMC Votes to Leave Rates Unchanged

The Fed declined to raise interest rates at the end of its policy meeting yesterday, (though this move was widely expected) the bank did, on the other hand, acknowledge the growing strength of the US economy – leaving the door open for a potential rate hike in December.

The accompanying statement shed light on the bank’s sentiment, noting that the long-term economic effects of the late-summer storms would likely be minimal and that the US economy remains on the forward foot.

The statement read:

‘Hurricane-related disruptions and rebuilding will continue to affect economic activity, employment and inflation in the near term, but past experience suggests that the storms are unlikely to materially alter the course of the national economy over the medium term’.

The prospect of a rate hike in December would traditionally foster demand, but markets are waiting to find out who will be replacing Janet Yellen as Fed Chair and if they will diverge from her monetary policy before buying too heavily into the ‘Greenback’.

This has left the EUR USD exchange rate teetering in the Euro’s favour.

EUR USD Forecast: Jerome Powell to be New Fed Chair?

Fed Governor Jerome Powell is currently top pick to be replacing Janet Yellen, with US President Donald Trump expected to make the announcement at some point today.

Powell, a Republican, is decidedly the safest pick of the bunch, with a standing on monetary policy that most closely reflects Yellen’s. Indeed, markets currently regard him as a voice of continuity, as he will most likely maintain the steady course of gradual rate increases that Yellen has upheld.

Powell even stated as much in June:

‘The healthy state of our economy and favourable outlook suggest that the FOMC should continue the process of normalising monetary policy. The Committee has been patient in raising rates, and that patience has paid dividends’.

Because of this, his appointment would most likely be well received on Wall Street, but it would still reflect a change in leadership and thus the potential for upheaval.

Markets await Powell’s speech (should he win the position) for any indication if he will deviate on monetary policy. In the mean-time the EUR USD exchange rate remains in the single currency’s favour.