- Euro US Dollar Exchange Rate Slides to 1.1732 – US Dollar Euro Climbs to 0.8519
- Eurozone Year-on-Year Inflation Remains Steady – Euro Remains on Back Foot
- ECB Meeting Minutes Ahead – Euro Tumbles in Anticipation
- FOMC Meeting Minutes Reveal Divide in Sentiment – US Dollar Initially Tumbles
Update: ECB Minutes Prove Dovish, Euro US Dollar Falls Even Further
The Euro to US Dollar (EUR USD) exchange rate tumbled this morning as markets reacted to the release of the latest European Central Bank’s (ECB) meeting minutes.
The minutes revealed that officials were worried about the strength of the single currency. They stated:
‘While it was remarked that the appreciation of the euro to date could be seen in part as reflecting changes in relative fundamentals in the euro area vis-a-vis the rest of the world, concerns were expressed about the risk of the exchange-rate overshooting in the future […] In this context, the point was made that, looking ahead, the Governing Council needed to gain more policy space and flexibility to to adjust policy and the degree of monetary policy accommodation, if and when needed, in either direction’.
This dovish tone immediately knocked the Euro against all of the majors.
[Updated 14:08 17/08/2017]
Eurozone Inflation Remains Steady, Euro (EUR) Continues to Tumble
The European Statistics Office Eurostat revealed this morning that the Eurozone’s overall inflation rate remained stable in July, though the core figure did slightly rise.
Their previous flash estimate for annual inflation was confirmed, remaining at 1.3% as prices (not including unprocessed food and energy) rose at the same rate as the previous period.
The core figure, however, jumped from 1.1% previous to 1.2% in July, in line with market expectations.
FOMC Meeting Minutes Reveal Divide in Fed Sentiment – US Dollar Initially Hurt
The US Dollar took a tumble against the Euro yesterday with the release of the July FOMC meeting minutes, which revealed a developing ‘fissure’ in sentiment regarding interest rates.
On one side, the message remains one of caution; that the current low levels of inflation do not warrant a rate hike and that the economy isn’t strong enough to withstand it. On the other, the message is that delays will continue to be costly and could, ultimately, end up causing a recession.
The minutes detailed:
‘Several participants noted that uncertainty about the course of federal government policy, including in the areas of fiscal policy, trade, and health care, was tending to weigh down firms’ spending and hiring plans […] In addition, a few participants suggested that the likelihood of near-term enactment of a fiscal stimulus program had declined further or that the fiscal stimulus likely would be smaller than they previously expected’.
The US Dollar has since recovered after the resulting tumble, despite a range of continued political controversies ranging within the Whitehouse.
The ultimate near-term forecast for this pairing remains dependent on the ECB meeting minutes, which are due at 11:30GMT today.