The Euro (EUR) has made marginal gains against the US Dollar (USD) today, advancing after US central bank caution weakened USD demand.
- EUR USD trades up at 1.1238 – USD EUR rate dips to 0.8896
- Euro advances on Spanish GDP growth – Falling French jobless claims offer similar support
- US Dollar weakens on cautious Fed minutes – Budget scrutiny continues concerning traders
- Euro rally possible on Italian confidence stats – US Dollar could drop if jobless claims rise
The Euro’s slight rise against the US Dollar today comes after positive news from Spain, where national GDP growth has risen in Q1. The quarter-on-quarter rise from 0.7% to 0.8% matched forecasts, but still raised EUR demand.
Additionally, Wednesday’s late French jobless claims data also improved the EUR USD exchange rate, as it showed a drop of -36.3k claims.
The US Dollar’s decline against the Euro today has been caused by two events, the first being Wednesday’s Federal Reserve minutes. Covering the Fed interest rate decision in May, the minutes showed caution among Fed officials, so much so that the US Dollar fell when the minutes were released.
Policymakers said that before considering an interest rate hike, it would be;
‘prudent to await additional evidence…that a recent slowdown in the pace of economic activity had been transitory’.
While this news has caused short-term damage to the US Dollar, economists are still forecasting a June interest rate hike.
Notably, the Fed minutes mentioned ‘significant uncertainty’ about President Donald Trump’s economic policies, so a near-term rate hike is still subject to change.
Other negative US news has concerned the still-contentious 2018 budget, which was announced earlier in the week. The plans are said to have an ‘egregious’ error, according to former Treasury Secretary Larry Summers.
According to Summers, the budget counts a $2tr figure twice, once for forecast revenue growth and another time for the amount used to reduce the budget deficit.
Summers says that this makes the spending plan ‘simply ludicrous’, which heaps further pressure on the Trump administration in the President’s absence.
Both of these factors have lowered confidence in the US Dollar, contributing to its current slide.
The last major Eurozone data of the week will come on Friday -a speech from the European Central Bank’s (ECB) Benoit Coeure and Italian confidence stats for May.
Coeure may not directly touch on monetary policy, but if Italian business and consumer confidence scores drop then the EUR USD exchange rate may fall.
Aside from any surprise Trump news, the US Dollar will next be influenced by today’s jobless claims figures. Covering initial and continuing claims in May, both figures are forecast to rise, which could weaken USD demand.
Current Interbank EUR USD Exchange Rates
At the time of writing, the Euro to US Dollar (EUR USD) exchange rate was trading at 1.1238 and the US Dollar to Euro (USD EUR) exchange rate was trading at 0.8896.