The Euro US Dollar (EUR USD) exchange rate surged by around half a cent this morning as markets reacted positively to a speech by European Central Bank (ECB) President Mario Draghi.
Euro (EUR) Surges as Draghi Strikes Hawkish Tone
The Euro jumped close to a new two-week high against the US Dollar early this morning as investors flocked to the single currency following an unexpected hawkish speech from Draghi.
The ECB President appeared upbeat about the Eurozone’s recent growth saying that the economic recovery in the block was both ‘strengthening and broadening’ following 16 straight quarters of expansion.
While Draghi again reiterated the need for continued economic stimulus to ensure that the recovery remained on track, investors remained upbeat as they focused on his change in wording regarding the banks stimulus plans.
Draghi’s usual call for ‘substantial degree’ of stimulus appeared to be downgraded to only a ‘considerable degree’, with analysts believing that this could be an indication that the ECB is finally beginning to consider winding down its quantitative easing programme and opening the way for the bank to begin raising interest rates again.
With the ECB currently stimulus package set to expire at the end of the year, Draghi’s comments today are likely to increase optimism that the bank will not look to extend it again into 2018, and outcome that is likely to be welcomed by investors.
US Dollar (USD) Subdued over Concerns for US Economic Growth
The US Dollar remained on its back foot this morning following the release of disappointing Durable Goods Orders data on Monday, which saw orders contract from -0.9% to -1.1% in May, falling behind expectations it would rise to -0.6% and reaching its lowest levels since November.
The continued decline appeared to be largely driven by a fall in orders for machinery and electrical equipment as increasingly wary US companies hold off on making further investments.
The lacklustre data has raised further questions about the state of the US economy, which appeared to have slowed dramatically in recent months, with only the labour market appearing to have strengthened as retail sales, inflation and manufacturing all grind to a halt.
EUR USD Forecast: Fed Yellen Speech Ahead
Looking ahead movement in the EUR USD exchange rate later today is likely to be closely tied to a speech by Federal Reserve Chair, Janet Yellen as she speaks in London this evening.
Yellen’s speech is expected to include a ‘wide-ranging discussion about global economic issues’ with any hints by the Fed chair that she expects the US central bank to continue its plans to raise interest rates for the a third time this year likely to cause the US Dollar to rally.
Meanwhile the Euro may attempt to extend its gains on Wednesday with the release of France’s latest Consumer Confidence data, with analysts predicting that Emmanuel Macron’s recent victory in both the Presidential and Parliamentary elections will have helped to bolster confidence across the country.
Current Interbank Exchange Rates
At the time of writing the EUR USD exchange rate was trending around 1.1259 and the USD EUR exchange rate was trending around 0.8884.