The Euro US Dollar (EUR USD) exchange rate advanced on Tuesday morning as German business confidence surged in July.
Euro (EUR) Climbs as German Business Confidence Reaches New Highs
The Euro strengthened this morning following the release of Germany’s latest Business Confidence survey, which painted an upbeat outlook amongst the firms surveyed.
According to the data compiled by Munich-based Ifo economic institute, its business climate index rose to 116 in June, up from 115.2 the month before and beating expectations it would have slipped to 114.9.
Ifo chief Clemens Fuest said in an accompanying statement;
‘Sentiment among German businesses is euphoric. Companies’ satisfaction with their current business situation reached its highest level since Germany’s reunification. Their short-term business outlook also improved. Germany’s economy is powering ahead.’
The rising sentiment comes despite the recent uptick in the Euro which typically pressures Germany’s manufacturers as it makes German goods more expensive and less appealing for foreign buyers.
However with private consumption soaring in recent months as a solid rise in construction activity increases domestic demand, German firms appear to be optimistic that they can ride out the single currencies current period of strength.
Trump Political Concerns Weigh on US Dollar (USD)
The US Dollar remains on the back foot today as concerns over possible connections between the Russian State and Donald Trump’s aides continue to hamper the currency.
Jared Kushner, Trump’s son-in-law and senior adviser was questioned on Monday about his dealings with Russian officials during the duration of his father-in-law’s campaign and while denying that he had colluded with the Russia state admitted that he had meet with officials.
This is the latest in a number of links tying Trump to Russia as the FBI investigates allegations that the Kremlin may have interfered in last year’s presidential election.
Meanwhile concern have also been prompted by Trump’s latest attempt to repeal his predecessors healthcare plan as many in the republican party seem reluctant to back the President’s bill despite his calls for unity on the vote tomorrow.
Another setback for the President is likely to be detrimental to the US Dollar as it cast further doubts over Trump’s ability to deliver on his promise to implement his ambitious stimulus package and tax reform plans.
EUR USD Forecast: Will Fed Hint at Third Rate Hike Later this Year?
Looking ahead the EUR USD exchange rate is likely to be closely tied to the outcome of the Federal Reserve’s latest monetary policy meeting on Wednesday with analysts hoping for some indication of central bank plans for the coming months.
While the Fed is expected to leave its current monetary policy in place in tomorrow’s meeting, Investors are hoping that Fed Chair Janet Yellen will drop some clues on the possibility of a third and final rate hike later this year, with any suggestion that this may be the case likely to cause the US Dollar to surge.
Meanwhile the euro may struggle to climb tomorrow following a speech by European Central Bank (ECB) policymaker Sabine Lautenschläger, with analysts predicting that she will echo her colleagues in calling for interest rates to remain unchanged for the foreseeable future as the bank chases higher inflation in the Eurozone.
Current Interbank Exchange Rates
At the time of writing the EUR USD exchange rate was trending around 1.1653 and the USD EUR exchange rate was trending around 0.8581.