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Euro US Dollar (EUR USD) Fluctuates as Sterling Gains Momentum

  • Euro US Dollar Hits 1.1944 – US Dollar Euro hits 0.8346
  • ECB Cœuré Calls for Accommodative Approach to Monetary Policy – Euro Falls
  • Storm Damage Continues to Hurt USD Sentiment – Thin Trading Exacerbates

The Euro US Dollar (EUR USD) exchange rate has continued to fluctuate this morning in the wake of yesterday’s speech from European Central Bank (ECB) Executive Board member Benoît Cœuré and a jump in Pound Sterling sentiment following the passing of the EU Repeal Bill.

Cœuré revealed something of a dovish sentiment yesterday when he discussed fears that a high-valued Euro might ruin the outlook for Eurozone inflation growth. He claimed that monetary policy should remain accommodative for a longer period of time in an attempt to negate this damage.

Cœuré stated:

‘Compared with past demand shocks, policy will remain more accommodative for longer, thereby likely muting further the pass-through of any growth-driven exchange rate appreciation’.

This view was somewhat more cautious than that taken by his peers, however, with Sabine Lautenschlaeger claiming that ‘the economy in the Euro area is doing better and the conditions are in place for inflation to pick up and move steadily toward our goal’.

EU Repeal Bill Passes, Pound Sterling (GBP) Steals the Show

Demand for the Euro has also been stymied by investors switching to a soaring Pound Sterling in the wake of yesterday’s EU Repeal Bill passing.

The bill is proposed legislation to sever legal ties with Brussels whilst also copying EU law into the domestic statute in an effort to create a smoother Brexit transition.

UK Prime Minister Theresa May stated her approval:

‘Although there is more to do, this decision means we can move on with negotiations with solid foundations and we continue to encourage MPs from all parts of the UK to work together in support of this vital piece of legislation.’.

Understandably this has remedied a great deal of investor anxiety that a ‘cliff-edge’ Brexit may be approaching, an event that would have been considered as far more likely if the bill had not passed.

In addition, Sterling’s gains were further cemented this morning when UK inflation was revealed to have smashed expectations, printing at 2.9% compared to the 2.8% forecast and the 2.6% previous. This significant leap places inflation way above the UK’s target and has caused many to wonder if it may be enough to compel the Bank of England (BoE) to raise interest rates.

US Dollar Bearish as Storm Relief Methods Continue

The US Dollar has continued to be subject to a loss in demand due to the ultimate trifecta of escalating geo-political turmoil with North Korea, immense damage wrought by storms Irma and Harvey and this week’s sparse data calendar.

Because of this the ‘Greenback’ has been unable to effectively capitalise on the Euro’s weakness, leaving EUR USD sitting trading within a narrow band.

EUR USD Forecast: Stagnation Possible

Both the Eurozone and the US remain inhibited by a quiet data calendar today, though the US will soon receive some notable data prints in the form of the NFIB small business optimism survey for August and the Jolts job openings figures for July.

Both readings are forecast to demonstrate a fall, with job openings expected to shrink from 6163 to 5950, and small business optimism expected to fall from 105.2 to 105.

With both of these data prints being somewhat inconsequential, however, the market reaction is not likely to be significant. The EUR USD pairing could simply continue to ahead of tomorrow’s German inflation print and US monthly budget statement – two events likely to cause far more notable movements.