EUR/USD Exchange Rate Steady as Italy’s Conte Promises to Revise Budget
The Euro US Dollar (EUR/USD) exchange rate is rangebound, and is currently trading at US$1.1337, despite Italy’s Prime Minister Giuseppe Conte saying yesterday that he would revise his country’s EC rule-breaking budget deficit.
The Euro (EUR) failed to make any significant gains on the US Dollar this morning, despite the release of the Eurozone’s latest services and composite PMIs for November, which revealed better-than-expected growth.
Today also saw the release of Spain’s industrial figures for November, which showed a significant increase on last year’s.
USD was weakened at the beginning of the week with US President Donald Trump and China’s President Xi Jinping coming to a consensus over trade issues, leaving yield-hungry investors to pile into riskier currencies.
The US Dollar (USD) is expected to remain relatively stable today, with US markets being closed in honour of the former US President George H.W. Bush.
EUR/USD Exchange Rate Rangebound despite Positive PMI Figures
EUR failed to make any notable ground on USD today, despite the release of the Eurozone’s all-important services PMI figures, which show a bigger-than-expected increase.
The Eurozone’s retail sales figures for October, also showed a significant increase over September, further bolstering market confidence in the Euro.
Investors are holding their breath today as Italy is due to release its revised budget, with the European Commissioner, Guenther Oettinger, saying:
‘We hope that a draft will come today that corresponds to the criteria for all Euro countries.’
EUR investors, however, have remained generally cautious over Conte’s proposed revision, with the previous reduction – from 2.4% to 2.2% – still breaking EC rules.
USD/EUR Exchange Rate Static despite US-China Trade Tensions Rocked by ‘Tariff Man’
The US Dollar (USD) was strengthened yesterday after the Federal Reserve Bank of New York President, John Williams, delivered a bullish speech in which he sounded optimistic about the US economy and said that further rate hikes in 2019 ‘still make sense’.
As USD weakened after the G20 summit, Trump appeared to backtrack on his US-China truce over tariffs yesterday, commenting on Twitter:
….I am a Tariff Man. When people or countries come in to raid the great wealth of our Nation, I want them to pay for the privilege of doing so. It will always be the best way to max out our economic power. We are right now taking in $billions in Tariffs. MAKE AMERICA RICH AGAIN
— Donald J. Trump (@realDonaldTrump) December 4, 2018
His comments spooked investors and saw demand surge for the ‘Greenback’ on signs that global economic tensions were returning.
EUR/USD Outlook: Italy’s Budget and UK’s Brexit Remain in Focus
The EUR/USD exchange rate looks to be driven by the raft of ecostats due for the US this week, and with signs that trade tensions are returning investors will likely be returning to the safe haven ‘Greenback’.
EUR investors will be awaiting news on Italy’s budget revision, with any signs that it is rejected by the EC once again dampening market confidence in the single currency.
The Euro (EUR) will also remain sensitive to any news on the UK’s Brexit situation, with British Prime Minister Theresa May rallying to gain support for her UK-EU withdrawal agreement despite mounting pressure coming from Parliament.
This comes after yesterday’s announcement from comments by a top judge at the European Court of Justice that the UK could unilaterally retract Article 50 if it so desired.
Friday will see the release of the Eurozone’s Q3 GDP figures, with any above-forecast increase likely to strengthen EUR.
USD may also find relief if Friday’s release of November’s no-farm payroll labour figures show an increase, likely buoying market confidence in the ‘Greenback’.
Overall, EUR is likely to be driven by political forces this week, with Brexit and Italy’s budget remaining in focus.