International Currency Movement Pushes EUR/USD Exchange Rate Lower
The Euro (EUR) has fallen against the US Dollar (USD) today, although given Euro strength elsewhere this is mainly down to a stronger US Dollar.
The US currency has rallied today thanks to a devaluation of the Chinese Yuan; by comparison there has been little Eurozone news to spark EUR gains.
US Dollar to Euro (USD/EUR) Exchange Rate Rises as Chinese Yuan Hits 1-Year Low
The US Dollar (USD) has risen sharply against the Euro (EUR) and most other currency peers today, thanks to recent international developments.
The Chinese Yuan (CNY) has fallen to its lowest level in a year, which has raised optimism among USD traders and made the US Dollar a more in-demand currency.
Strong declines in currency value are often all it takes for other currencies to appreciate, as today’s USD advance has shown.
To a lesser extent, the US Dollar has also risen on signs that US President Donald Trump is aware of Russian interference in the 2016 Presidential Election.
Mr Trump caused controversy earlier this week when he appeared to deny Russian involvement in the vote, despite contrary evidence from US intelligence services.
USD/EUR Exchange Rate Gains Persist after Fed Powell Testimony
Another factor keeping the US Dollar (USD) in demand against the Euro (EUR) today has been continued optimism from remarks by Fed Chair Jerome Powell.
The Chairman of the Federal Reserve, the US’s central bank, has just finished two days of testimony during which he discussed monetary policy.
Mr Powell intimated that there would be a continued path of gradual interest rate hikes in the future, which raised USD trader hopes for two more rate hikes in 2018.
Not every comment came in the US Dollar’s favour, however, as Mr Powell also warned that higher inflation caused by trade tariffs could alter the Fed’s outlook:
‘If we do have higher inflation, that could be very challenging for policy.’
Euro to US Dollar Exchange Rate Forecast: Will EUR/USD Fall Further on Poor Confidence Data?
The Euro’s (EUR) losses against the US Dollar (USD) today might worsen next week, when Eurozone consumer confidence and PMI estimates come out.
There could be a bad start to the week with July’s consumer confidence estimate out on Monday, which is tipped to show a decline from -0.5 points to -2.3.
Further losses may come from Tuesday’s preliminary Eurozone PMI readings; these are tipped to show slowing overall Eurozone activity as well as a services sector dip.
That said, Germany’s high-impact manufacturing PMI is predicted to print higher in July; this could reassure Euro traders and prevent a EUR/USD drop.
The next US economic data to watch out for will also come out on Tuesday, similarly consisting of PMI activity estimates for July.
These are predicted to show lower services and composite readings, but a slight increase in manufacturing sector activity.
If all three US readings show unexpected growth then the US Dollar could advance against the Euro; such results would increase the odds of a near-term Fed rate hike.