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Euro to US Dollar (EUR/USD) Exchange Rate Losses Seen after Optimistic Fed Meeting

The Euro (EUR) has made a minor advance against the US Dollar (USD) today, thanks to the latest international developments.

China has fired back in the ongoing US-China trade spat, threatening tariffs worth around $60bn on US imports.

This represents a significant source of concern for US businesses and exporters, so has led to a USD/EUR exchange rate decline.

(Last updated 3rd August, 2018)

Greater Demand for US Dollar Triggers EUR/USD Exchange Rate Decline

The Euro (EUR) has fallen by -0.3% against the US Dollar (USD) today, although this is mainly down to USD strength than single currency weakness.

The latest Eurozone news has been low-impact but positive, with Spanish jobs market data showing that the number of registered workers is at a 10-year high.

The Spanish unemployment rate hit an alarming 27% in 2013, but has steadily fallen since then, making today’s data a sign of steady improvement.

There was a caveat to the stats, however, as a large number of jobs were added to the services sector; this includes seasonal tourism-related employment.

This factor has limited the positive effect of the data, as the surge in employed persons could be reversed when these temporary positions close out-of-season.

US Dollar to Euro (USD/EUR) Exchange Rate Rises 0.3% on Optimistic Fed Forecast

The US Dollar (USD) has risen to a two-week high against the Euro (EUR) today, thanks to the latest Federal Reserve monetary policy meeting.

Officials at the US central bank left interest rates frozen at 2% as expected, but still boosted the US Dollar by optimistically assessing economic stability.

While not explicitly signposted, the post-meeting statement suggested a September interest rate hike; this would the third hike so far this year.

USD traders are anticipating a total of four interest rate increases this year, so any signs that further rate hikes are on the way have boosted USD trader optimism.

Touching on the importance of today’s meeting in the larger scheme of things, Aberdeen Standard Investments Senior Global Consultant James McCann said:

‘It is going to be interesting to watch the Fed’s communications between now and September, when we expect the central bank to deliver a third hike of 2018.’

Euro to US Dollar Exchange Rate Forecast: Are Greater EUR/USD Losses ahead on US Factory Stats?

Unfortunately for Euro (EUR) traders, the week may end on a negative note if this afternoon’s US data and Friday’s Eurozone ecostats print as forecast.

This afternoon could see the US Dollar (USD) extend its lead against the Euro, if US factory orders rise as expected.

The base monthly reading for June is expected to show growth from 0.4% to 0.7%, which would suggest increased economic confidence among US businesses.

Potentially worsening the situation, Friday morning’s finalised Eurozone composite and services PMIs are tipped to show slowing economic activity.

Returning to US data, Friday afternoon will bring July’s non-farm payrolls and unemployment rate figures which could cement USD/EUR exchange rate gains.

The US jobless rate is expected to fall from 4% to 3.9% and the payrolls reading might push the US Dollar higher if it shows a surge in job creation.