Although the EUR/USD exchange rate was favourable earlier on in Monday’s trading session, the pairing has since traded tightly due to lower confidence.
An eagerly-awaited speech from European Central Bank (ECB) President Mario Draghi has destabilised the Euro, worsening the EUR/USD exchange rate.
Mr Draghi has largely given a cautious outlook, emphasising that quantitative easing (QE) could be around for the foreseeable future.
(First published 26th February, 2018)
Forecast for Greater Eurozone Stability Keeps EUR/USD Exchange Rate Favourable
On a morning of limited Eurozone news, the Euro to US Dollar (EUR/USD) exchange rate has risen by 0.4%.
This single currency appreciation comes after the prediction that there are lower risks of the Eurozone suffering from a public debt crisis.
Natixis Research Analyst Patrick Artus has largely reassured Euro traders with his forecasts for future stability, stating;
‘Peripheral Eurozone countries now have external surpluses: a public debt crisis cannot be triggered by a balance of payments crisis, since these countries no longer need non-residents to finance their fiscal deficits.
The holding of Eurozone government bonds has become more domestic. So there could be a public debt crisis only if the country’s residents refused to hold their own national debt, which is very unlikely’.
US Dollar to Euro (USD/EUR) Exchange Rate Tumbles ahead of Fed’s Powell’s Testimony
The US Dollar to Euro exchange rate (USD/EUR) has fallen by -0.4% today, due to trader caution before a high-impact event featuring Federal Reserve Chair.
Jerome Powell, who took over as Chair in early 2018, is set to give his first testimony to Congress on Tuesday and Thursday this week.
USD traders are anxious to see what Mr Powell’s plans for US interest rate changes are in 2018, and whether they are more or less aggressive than his predecessor.
Former Fed Chair Janet Yellen adopted a holding pattern on US interest rates until as recently as December 2016, when the bank finally raised rates.
As well as Powell’s stance being a source of concern, USD traders are also worried about whether it is advisable to keep raising interest rates at the current pace.
Euro to US Dollar Exchange Rate Forecast: EUR/USD Rate Risks Falling on Confidence Data
The Euro could fall back against the US Dollar (EUR/USD) in the near-term, when Eurozone-wide confidence data for February is released on 27th February.
In most cases, predictions are for lower levels of economic and business confidence, indicating declining levels of optimism among survey respondents.
High-impact events like German coalition votes and the Italian election are less than a week away, so declines could be considered temporary ‘blips’ by traders.
Later on during Tuesday’s trading session, the Euro could also be unsettled by the release of Germany’s inflation rate reading for February.
Initial estimates are for slowing inflation during the month, which could result in the Euro falling in value.
For US Dollar movement in the future, it is worth watching out for a speech from Federal Reserve official Randal Quarles, who will be giving remarks this evening.
Mr Quarles is a voting member of the Federal Reserve during 2018, so his comments may have a greater-than-usual impact on the value of the US Dollar.
Previously, Mr Quarles has stated that gradually raising interest rates will be appropriate. If he reiterates this sentiment then a USD/EUR rate rise could occur.