EUR/USD Exchange Rate Drops Despite Dovish US Federal Reserve Outlook
The Euro US Dollar (EUR/USD) exchange rate is down today and is currently trading around $1.1388.
The US Dollar (USD) has gained on the weakened Euro (EUR) today despite the Federal Reserve holding its interest rate last night at 2.5% and, in a move which was interpreted as overwhelmingly dovish, slashing its forecast for any future hikes throughout 2019.
The US Central Bank took a particularly bearish tone, saying:
‘US growth of economic activity has slowed from its solid rate in the fourth quarter. Recent indicators point to slower growth of household spending and business fixed investment in the first quarter.’
The ‘Greenback’ was buoyed by positive US initial jobless claims figures for March today, which came in below forecast at 221K against last month’s 230K.
These were also followed by US continuing jobless claims figures which also came in below expected, further encouraging the USD/EUR exchange rate.
Euro investors will be focusing on the European Council Meeting today, and with any indications that political unrest or economic pressures are continuing to weigh on the EU, this could prove a further drag on the single currency.
EUR/USD Exchange Rate Falls amid EU Political Concerns
The Euro has failed to benefit from a weakening US Dollar today, and has been continually plagued by political upheaval with the European People’s Party (EEP) withdrawing the voting rights of the Hungarian President Viktor Orban’s party, Fidesz.
Many EUR traders are also becoming increasingly concerned over Italy’s attraction to China’s New Silk Road, which has further ignited fears over Rome’s allegiance to the EU.
Michele Geraci, Italy’s Undersecretary of State for Trade and Investment, commented:
‘The way we see it, it is an opportunity for our companies to take the opportunity of China’s growing importance in the world… We feel that amongst our European partners, Italy has been left out.’
Ongoing Brexit concerns are also weighing on the single currency today, with fears that Prime Minister Theresa May’s withdrawal agreement might be rejected by MPs for a third time, which would, in effect, lead to a possible no-deal between the UK and the EU.
EUR/USD Forecast: Euro Could Rise on Signs of Brexit Consensus
Tomorrow will see a raft of Eurozone economic data stats, with most Euro traders focusing on the publication of the German Markit Manufacturing PMI figures for March, which are expected to improve.
These will be followed by the Eurozone’s flash Markit PMI for March tomorrow, which are expected to decrease.
US Dollar traders, meanwhile will be looking ahead to tomorrow’s flash Markit Manufacturing figures for March, which are expected to increase to 53.6.
The EUR/USD exchange rate, however, will likely be dictated by developments within the EU tomorrow, with Brexit remaining in focus ahead of the UK’s important Parliamentary vote on Theresa May’s Brexit deal next week.