EUR/USD Exchange Rate Falls as UK Brexit Woes Increase on New PM Boris Johnson
The Euro US Dollar (EUR/USD) exchange rate fell by 0.4% today, leaving the pairing fluctuating around $1.115.
The Euro (EUR) fell against the US Dollar (USD) today as analysts are increasingly expecting the European Central Bank (ECB) to cut its interest rates to add stimulus to the economy.
Carsten Brzeski, the Chief Economist at ING, commented:
‘The main question is whether the ECB can afford to wait six more weeks before delivering new monetary stimulus or whether it should surprise financial markets by frontloading new measures.’
Today also saw the ECB’s lending survey report, which indicated that due to increasing Eurozone economic woes and heightened global political uncertainty, loan demands would increase in the third quarter.
The ECB said in its statement:
‘Lower risk tolerance and, for loans to enterprises, heightened risk perceptions, accompanied by higher cost of funds and balance sheet constraints, contributed to the tightening of credit standards across loan categories.’
Euro traders are also concerned over the appointment of known Brexiter Boris Johnson as the Prime Minister of the UK, which has further heightened fears that there could be a disorderly Brexit on 31 October.
USD/EUR Exchange Rate Edges Higher Despite Easing US Existing Home Sales Figures
The US Dollar, however, failed to benefit from today’s printing of the US existing home sales figures for June.
These came in worse-than-expected, falling from 5.36M to 5.27M.
Reuters said in their report:
‘U.S home sales fell more than expected in June as a persistent shortage of properties pushed prices to a record high, suggesting the housing market was struggling to regain its footing since hitting a soft patch last year.’
Today also saw the printing of the US housing price index figures for May, which fell below forecasts and increased by 1%.
Nevertheless, the US Dollar is benefiting from lowering expectations of an aggressive rate cut from the Federal Reserve this month.
EUR/USD Outlook: Eurozone and US PMI Figures in Spotlight
Euro traders will be looking ahead to tomorrow’s flash German Markit Manufacturing PMI figures for July.
These are expected to improve from 45.0 to 45.2, and could likely provide some uplift for the European currency.
Tomorrow will also see the Eurozone’s PMI composite figure for July, which are, however, expected to sink slightly from 52.2 to 52.1.
US Dollar traders, meanwhile, will be looking ahead to tomorrow’s flash Markit Manufacturing PMI figure for July.
As these are expected to increase from 50.6 to 51 however, it is likely that the EUR/USD exchange rate will remain subdued as the ‘Greenback’ continues to benefit from positive economic data ahead of the Fed’s rate decision this month.