- Euro US Dollar Climbs to 1.2060 – US Dollar Euro Falls to 0.8295
- ECB Begins Talks about Ending its QE Scheme – Euro Soars as a result
- US President Donald Trump Raises Government Debt Ceiling – US Dollar Fails to Capitalise
- Eurozone GDP Proves Positive – Further Cements Euro Lead
The Euro US Dollar exchange rate has soared today in the wake of the of the European Central Bank’s (ECB) September policy meeting, which featured talks regarding the end of its quantitative easing (QE) scheme, and some robust Eurozone GDP figures.
Some economists have claimed that the strength of the Euro has been to its own detriment, as it both reduces export competitiveness and prevents inflation from rising. Because of this the Eurozone’s inflation level remains consistently below the Bank’s target, further preventing any likelihood of a rate hike.
A rate hike was not predicted to occur at this session, however, nor at any session in the near future. Instead the main attraction was the possibility that the Bank might mention plans to taper its QE scheme – something that did indeed occur.
The key message from the accompanying press conference with ECB President Mario Draghi was that the ECB is preparing to slow its programme of stimulus, although they aren’t in a massive rush to do so.
‘We will announce when we are ready. We think we are going to be ready for much of what we have to decide in October… if we are not then we postpone’.
Traders immediately considered this to be an indication that QE will soon be toned down, thus demand for the single currency soared.
Eurozone 3RD Estimate GDP Beats Expectations, EUR Lead Cemented
Economic growth within the Eurozone accelerated at a faster pace than previously thought in Q2 2017, expanding 2.3% year-on-year and beating the estimate of 2.2%.
These figures confirmed that the Euro-Area’s economy developed at its fasted speed since the debt crisis some five years ago, providing a bright outlook and also demonstrating that the European economy is remaining competitive with the US, which recorded growth of 2.2% year-on-year in Q2.
The Euro extended its gains against the US Dollar as a result of this news.
US President Donald Trump Announces Extension of Debt Ceiling, USD Fails to Capitalise
US President Donald Trump surprised both parties in Congress yesterday with the announcement that he was backing a Democrat deal that attaches hurricane relief money to a 3-month raise in the debt ceiling, as well as news that he would be keeping the government open.
The government debt ceiling was an ongoing source of anxiety for investors, with many worried that an abrupt government shutdown would occur and harm the US economy.
This move drove demand back to the US Dollar very briefly, although it remained overwhelmed in the wake of the Euro’s current surge.
EUR USD Forecast: Euro Liable to Extend its Lead
Notable data releases on Friday will be US consumer credit figures for July, which are expected to demonstrate a rise from $12.4B to $15B, and the German trade balance, which is expected to have shrunk from 22.3b to 21B.
Beyond this, Friday will also feature very notable speeches from Fed policymakers William Dudley, Patrick Harker and Esther George, though out of all three members only Harker’s position remains questionable, as he has historically remained centrist.
Whilst George might take a hawkish tone during the speech, the market reaction will likely remain subdued as she is already well established as a hawk, whilst Dudley is regarded as a dove.
If Dudley or Harker upset the applecart and take a hawkish stance then the US Dollar may find itself clawing back some losses, though if their speeches prove unexceptional, the Euro will likely extend its gains.