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Euro Holds 1.07 Vs US Dollar as US Interest Rate Decision Disappoints

The EUR USD exchange rate was able to jump from a low of 1.0613 to a high of 1.0743 in the wake of the Federal Reserve interest rate decision. While the Euro came away from its best levels on Thursday morning, the currency is still holding most of its gains.

  • EUR GBP rate drops to 0.87 – EUR USD rate holding 1.07
  • Euro demand limited despite rising inflation – Recovery possible on trade stats
  • Pound slides ahead of royal assent on Brexit bill – BoE event may cause little impact on GBP
  • US Dollar battered by Fed rate hike – USD recovery possible on claims stats

Developments in the US have helped the Euro hold most of its recent gains today, although confirmation of four-year high inflation in the Eurozone had little additional impact on the common currency.

While February’s annual inflation is now confirmed at 2%, the European Central Bank’s (ECB) target, the ECB is still not expected to make any alterations to interest rates for the foreseeable future.

With the Article 50 bill expected to receive royal assent today and the Bank of England’s (BoE) interest rate decision ahead, the Pound has fallen slightly against the Euro and US Dollar.

As the last stage of the bill’s approval, this final confirmation removes any barriers to Article 50 being triggered and only makes it a matter of time before the UK officially starts the ‘Brexit’ process.

The US Dollar’s rise very slight gains against the Euro and Pound today follows a sharp drop after the Federal Reserve hiked interest rates from 0.75% up to 1%.

The adjustment had been so long expected that it had no impact on the US Dollar, and the currency was driven lower by the Fed’s tone when talking about future adjustments. It hinted at only two further rate hikes in 2017 and offered no indication of when they might occur.

For the remainder of the week, the Euro could rise against the Pound and US Dollar on Friday when Eurozone-wide construction and trade balance stats are announced.

While no forecasts have been made, the previous postings both showed growth, making further positive figures likely to trigger Euro appreciation against its peers.

The next big UK news is due today, coming straight from the Bank of England (BoE). While the BoE has reeled in the wake of Assistant Governor Charlotte Hogg’s resignation, today’s meeting is expected to be ‘business as usual’ with no interest rate change from 0.25%.

If Governor Mark Carney has any time to talk policy and outlook amid questions about Hogg’s replacement, he may just reiterate the previous ‘cautiously optimistic’ stance, causing little overall Pound movement.

The Governor’s task of predicting UK economic performance has been complicated because Article 50 has not yet been triggered; when this does take place in the last week of March the Pound could slump.

Current EUR GBP USD Interbank Exchange Rates

At the time of writing, the Euro to Pound (EUR GBP) exchange rate was trading at 0.87 and the Euro to US Dollar (EUR USD) exchange rate was trading at 1.07.