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Euro to US Dollar Exchange Rate Rallies ahead of Possible Fed Interest Rate Hike

The Euro has risen considerably against the US Dollar today, owing to uncertainty about an upcoming US interest rate decision.

  • EUR USD trades at 1.1275 – USD EUR rate hits 0.8869
  • Euro advances amid Fed rate hike fears – Eurozone industrial stats boost EUR
  • Poor US sales stats lower USD value – Hopes of three hikes in 2017 may be dashed
  • Eurozone trade data out Thursday – US Dollar may drop on dovish Fed comments

The present uncertainties in the US have pushed the Euro up against the US Dollar, to a rate of 1.1275.

Euro Advances after despite Surprise Employment Rise

The current strength in the Euro to US Dollar exchange rate has come after broadly positive Eurozone data.

The latest data has shown a rise in Q1 employment, both in quarter-on-quarter and year-on-year fields. The data was particularly encouraging as it showed an employment rise of 1% in Greece, a nation that has long struggled with high unemployment.

Also out have been Eurozone industrial production figures. These showed a rise on the year in April, as well as a smaller-than-expected monthly decline.

Offering a snap forecast on the news was Bert Colijn of ING Bank;

‘The outlook for industry does remain bright as businesses have been indicating that backlogs of work are increasing as new orders are coming in at a faster pace. This will likely translate into accelerating growth over the course of Q2’.

US Dollar Slides on Shrinking Retail Sales

The US Dollar has gone from bad to worse today, falling steadily against the Euro on domestic data and trader uncertainty.

These latest losses have been caused by disappointing US inflation rate and retail sales figures for May.

Monthly sales fell into negative ranges, while annual figures also indicated declines. Further lowering confidence, inflation slowed in almost all fields. Both of these results have raised concerns that the Federal Reserve could put off any more US interest rate hikes in 2017.

Detail on Fed Interest Rate Decision could Trigger EUR USD Drop

The Euro could be unsettled when Thursday’s trade balance results for the Eurozone are announced. A surplus decline is forecast in April, but not to the point of a deficit figure being reached.

The next main influencer of the Euro and US Dollar will be the upcoming Federal Reserve interest rate decision. Forecasters see a rate hike from 1% to 1.25% as practically guaranteed, which may mean that an actual US Dollar rise is minimal. This is because traders may have been ‘pricing in’ such an outcome, which lowers its overall impact.

If the US Dollar rises on the news, the Euro could conversely drop. Following the rate announcement, the US Dollar could shed any gains if it looks like there won’t be any more interest rate hikes in 2017.

At least three was the estimate of many economists earlier in the year, but following disappointing jobs figures and growing uncertainty about Trump policies, the Fed may hold off in the future.

Current Interbank EUR USD Exchange Rates

At the time of writing, the Euro to US Dollar (EUR USD) exchange rate was trading at 1.1275 and the US Dollar to Euro (USD EUR) exchange rate was trading at 0.8869.