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Euro US Dollar (EUR/USD) Exchange Rate Climbs as Risk Aversion Hits the Greenback

long term Pound Euro forecast

German Retail Sales Disappoint, Euro (EUR) Exchange Rates Remain Unperturbed

The Euro US Dollar (EUR/USD) exchange rate inched higher on Friday, unperturbed by a weak German retail sales print and spurred onward by rampant speculation regarding the nature and effects of tougher trade talk from the US President Donald Trump.

It would appear that German shoppers decided to stay at home in January, confounding expectations of a climb in retail sales and marking the second successive contraction for this reading.

This resulted in a -0.7% print on the month, below the forecast of a 0.9% rise.

On a year-on-year basis, however, retail sales were up 2.3% compared to the previous period’s -0.2% (though still below the forecast of 2.5%).

These readings proved disappointing for those who hoped that Germany might reduce their reliance on foreign trade, but beyond this; these figures come shortly after GfK revealed that the mood amongst German shoppers has darkened moving into March, largely on the back of political concerns.

It would appear that this has now been realised in softer retail trade, a trajectory that could continue unless Germany finally gains effective governance in next week’s Social Democrat (SPD) vote.

Trump Proposes Steel, Aluminium Import Tariffs – US Dollar (USD) Exchange Rates Flounder amid Ensuing Market Turmoil

US President Donald Trump announced late yesterday his proposal to impose a trade tariff on imported steel and aluminium at 25% and 10% respectively.

The President argued that these tariffs would protect US companies and promote the creation of new manufacturing plants, effectively protecting US producers for ‘a long time’.

This news also comes shortly after last week’s announcement from the US Commerce Department that indicated that tariffs against foreign producers were necessary in order to protect the country’s national security interests.

The markets were still taken by surprise, however, with many concerned that this tougher trade talk could provoke a global trade war.

Indeed, some analysts have argued that the tariffs could hurt the US economy because other countries could then impose tariffs on US exporters.

The President disagreed, however, stating:

‘When a country (USA) is losing many billions of dollars on trade with virtually every country it does business with, trade wars are good and easy to win. Example, when we are down $100 billion with a certain country and they get cute, don’t trade anymore – we win big. It’s easy!’

Nonetheless, investors seem rather unsure of how to perceive the news, with the majority taking the cautious route and fleeing from the ‘Greenback’.

This allowed the EUR/USD exchange rate room to claw back some of its recent losses.

Euro US Dollar (EUR/USD) Exchange Rate Forecast: German Coalition Vote and Italian Election Ahead

The Euro US Dollar (EUR/USD) exchange rate is set to encounter some severe volatility early next week as markets respond to two very significant events; Italy’s general election, and Germany’s SPD vote on a coalition deal with Angela Merkel’s Conservatives (CDU).

Polls are currently pointing to a lead for Italy’s Five-Star movement, though their refusal to join forces with others could leave Luigi Di Maio just short of outright leadership.

In this respect, Silvio Berlusconi could be the kingmaker in this equation, with his centre-right coalition having gained massive ground in recent weeks.

Markets are, nonetheless, very concerned that a party with an anti-EU stance could get into power, simply because it could eventually involve Italy leaving the European Union, an event that would severely harm the value of the Euro.

For Germany, the SPD’s vote will effectively decide if Germans return to the polls or not, with a rejection of Merkel’s coalition deal liable to cause a massive drop in demand for the single currency.