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Euro to US Dollar Exchange Rate Dips after Fed Hawkishness

Despite making initial gains, the Euro has since fallen against the US Dollar. This reversal of fortune has followed a speech from Federal Reserve official Eric Rosengren.

Commenting on interest rates generally, Rosengren warned that low interest rates pose a rise to financial stability.

This was interpreted as meaning that another US interest rate hike might be coming in 2017; such sentiment pushed the US Dollar up against the Euro to a rate of 0.8987.

(First published 09:35, June 20th, 2017)

The Euro has made minor gains against the US Dollar today, following a pair of speeches from Federal Reserve officials.

  • EUR USD trades up at 1.1149 – USD EUR rate dips to 0.8967
  • Euro advances on Spanish trade news – Deficit falls in April
  • US Dollar weakens on Fed comments – Fed’s Evans takes cautious tone
  • ECB speech and Dutch confidence scores upcoming – Further Fed speeches due

The Euro has advanced to 1.1152 against the US Dollar today, although this exchange rate is still close to the worst of the week.

Euro makes Minor Advance after Spanish Trade Deficit Falls

Despite a limited amount of Eurozone news today, the Euro has still made minor gains against the US Dollar.

This follows the news that Spain’s trade deficit in April has fallen, from -1.5bn to -1.2bn. While not as big a reduction as forecast, this is still a positive step for the nation.

US Dollar Trades Down after Concerning Fed Comments about US Economy

After two speeches from Fed officials, the US Dollar to Euro exchange rate has remained close.

This lack of clear movement has been left the US Dollar rudderless, as it follows previous concerns that the Fed may not raise interest rates again in 2017.

The first speaker, Charles Evans, stated that the Fed should wait until the end of the year before deciding on the next interest rate hike.

This cautious approach has sapped confidence that a third rate hike will be coming in 2017, weakening the US Dollar in the process.

After this, fellow Feb member Stanley Fischer stated that house prices are rising; Fischer loosely linked this back to the late 2000’s financial crash.

In the context of plans to deregulate the US lending and mortgaging industry, this outlook was also treated negatively. If regulations are relaxed then the risk of another financial crash rises, as it could lead to more unstable lending practices.

Euro Decline Possible on Dutch Confidence Data

The last major Eurozone news of the day will be a speech from European Central Bank (ECB) official Benoit Coeure.

If Coeure happens to deliver an optimistic forecast about the Eurozone economy, then the Euro could appreciate.

Further ahead, Dutch consumer confidence figures for June are out early on Wednesday.

Confidence has steadily been rising since July 2016, but between April and May the index dropped from 26 points to 23.

If another drop is recorded then the Euro may slump, as it would indicate an erosion of previously growing confidence.

The next US news will be in a similar vein to previous announcements, consisting of speeches from Federal Reserve officials.

Next up are Eric Rosengren and Robert Kaplan; Kaplan is the only of the two on the Fed’s 2017 voting committee, but both may deliver high-impact remarks.

Broadly speaking, if both men indicate that another US interest rate hike could come in 2017, then the US Dollar may rally against the Euro.

Current Interbank EUR USD Exchange Rates

At the time of writing, the Euro to US Dollar (EUR USD) exchange rate was trading at 1.1151 and the US Dollar to Euro (USD EUR) exchange rate was trading at 0.8965.