EUR/USD Exchange Rate Slips on ECB Speculation
The Euro US Dollar (EUR/USD) exchange rate is on the back foot this morning as investors remain cautious towards the single currency ahead of the European Central Bank’s (ECB) latest policy meeting.
At the time of writing the EUR/USD exchange rate is currently trading at $1.1177, down almost 0.3% so far this morning and leaving the pairing at a six-week low.
Euro (EUR) Struggles as Investors Cautious ahead of ECB Meeting
The Euro (EUR) is struggling to find support this morning as ECB speculation leaves investors bearish towards the single currency.
The ECB will conclude its July policy meeting later this week and analysts appear split on whether the bank could surprise markets with the announcement of new easing measures this month.
While the general consensus is that the ECB will leave its monetary policy untouched this week, whilst altering its forward guidance to indicate plans to take action in September, some economists are forecasting the bank could attempt to stay ‘ahead of the curve’ by announcing a rate cut of 10 basis points.
While the odds of such a cut this month are currently below 40%, EUR investors remain wary that a spat of Eurozone data being released in the meantime could still influence policymakers.
US Dollar (USD) Appreciates as Markets Welcome US Budget Deal
Meanwhile, helping to propel the US Dollar (USD) higher this morning was Donald Trump’s announcement that a bipartisan budget deal has been agreed.
The news was cheered by USD investors as it will remove the threat of the US facing another fiscal crisis until at least 2021 as Congress agreed to raise the national debt ceiling.
Marshall Gittler, Chief Strategist at ACLS Global explains:
‘This takes the threat of yet another debt-ceiling drama off the table for two years, by which time many of us fervently hope that a set of rational politicians will have taken office and this whole pointless recurring drama will be done away with.’
However, this doesn’t completely remove the risk that the US government could shut down again in October should Congress be unable to pass its spending bills.
EUR/USD Exchange Rate Forecast: Upcoming Eurozone Data to Influence ECB Decision?
Ahead of Thursday’s rate decision by the ECB, we may see a slew of Eurozone economic data impact the Euro US Dollar (EUR/USD) exchange rate, especially it is seen as increasing the chances of the ECB taking action this month.
Coming first will be the publication of the Eurozone’s latest consumer confidence later this afternoon, where another gloomy reading in July could drag on the single currency.
This will be followed by the Eurozone’s PMI figures on Wednesday, where a suspected slowdown in the bloc’s private sector may exert further pressure on the Euro.
Meanwhile in focus for USD investors this week will be the publication of the latest US GDP figures, with the US Dollar potentially weakening in the latter half of the session if domestic growth slowed in line with expectations in the second quarter.