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Euro US Dollar Exchange Rate Steady, European Leaders Brace for UK’s Brexit after Tory Election Victory

EUR/USD Exchange Rate Rangebound, European Council President ‘Ready’ for Brexit

The Euro US Dollar (EUR/USD) exchange rate held steady this morning, with the pairing currently trading around $1.118 as European leaders brace for the UK’s Brexit after British Prime Minister Boris Johnson’s decisive victory in yesterday’s general election.

Charles Michael, the new President of the European Council, commented:

‘We expect as soon as possible a vote by the British parliament on the withdrawal agreement. It is important to have the clarity as soon as possible. We are ready. The EU will negotiate to ensure to have a close cooperation in the future with the UK.’

Some Euro (EUR) traders, however, have breathed a sigh of relief over the added clarity over Brexit, with the Tories promising to agree upon a deal by the end of January.

The EUR/USD exchange rate also steadied on increased hopes of a US-China trade breakthrough, following reports that the two superpowers could secure a ‘phase one’ trade deal in the near-term.

However, Euro (EUR) investors will be paying close attention to the EU leaders’ summit and European Council Meeting today, with any dovish commentary on the Eurozone’s economy weakening market confidence in the single currency.

USD/EUR Exchange Rate Steady, US-China Trade Deal Hopes Rise

The US Dollar (USD) failed to gain on the Euro (EUR) today as the ‘Greenback’ has lost some of its safe-haven appeal following reports of a near-breakthrough in US-China trade talks.

This follows a tweet by US President Donald Trump, in which he said that a trade deal between the two superpowers was ‘very close’.

Robert Subbaraman, Head of Research at Nomura, said:

‘We suspect China has agreed to much more than just increased US agricultural purchases.’

However, hopes of a US-China trade deal are also providing optimism in the American economy, which could likely benefit from an end to the trade war.

In US economic news, today will see the release of the US Retail Sales Control Group figure for November, which is expected to hold at 0.3%. If, however, the report beats forecasts and rises before Christmas, we could see the ‘Greenback’ rise on restored hopes of a growing American economy.

EUR/USD Outlook: Eurozone Flash PMIs in Focus

Euro (EUR) investors will be looking ahead to Monday’s release of Germany’s flash Markit Manufacturing PMI figure for December, which is expected to remain mired in contraction territory at 44.5.

Monday will also see the influential release of the Eurozone’s Markit PMI Composite figure for December, with any signs of improvement buoying the Euro as hopes rise on a near-term recovery for the bloc’s struggling economy.

US Dollar traders, meanwhile, will be awaiting Monday’s publication of the US Markit PMI Composite figure for December, which is expected to remain strong at around 51.9.

US-China trade developments will, however, remain in focus next week, with any signs of a ‘phase one’ trade deal being agreed upon by the two superpowers likely weakening the safe-haven ‘Greenback’ as traders seek out riskier assets.