- EUR USD rate slides to 1.1566 – USD EUR trades higher at 0.8644
- Euro dips as Eurozone retail activity slows – German construction slowdown also seen
- US Dollar strengthened on Fed news – Retirement opens another slot on Fed board
- Euro may recover on German trade stats – Will USD rise further on Yellen speech?
The US Dollar’s strong performance has been caused by signs of a change in leadership at the Federal Reserve.
Euro Tumbles on Lower Eurozone Retail Activity
The Euro to US Dollar losses seen today come after a slowdown was reported in Eurozone retail activity.
In October, the Eurozone retail PMI fell from 52.3 points to 51.1, showing slower growth during the month.
Eurozone-wide retail sales actually rose in September, but this wasn’t enough to distract traders from the PMI reading.
US Dollar Strengthened by Another Opening on Fed Board
The 0.4% rise in the US Dollar to Euro exchange rate today has been triggered by news from the Federal Reserve.
In a speech on Monday, Fed Bank of New York President William Dudley revealed that he will be retiring in mid-2018.
This brings the total openings in the Fed next year to three, or potentially four if departing Chair Janet Yellen doesn’t stay on as a governor.
These vacancies open the door to more hawkish policymakers being put in place, which could result in tighter monetary policy going ahead.
Under such conditions, there could be a faster pace of US interest rate hikes, along with the progressive unwinding of the Fed’s considerable quantitative easing portfolio.
Euro could Bounce Back on German Trade Balance Data
There isn’t much high-impact Eurozone news out on Wednesday, so the Euro might next be moved by Thursday morning’s German data.
This will be the trade balance figure for September, which is tipped to show a surplus expansion.
A rise from 20bn to 21.5bn could trigger a Euro rally, as it would suggest a stronger German economy and improve the odds of tighter monetary policy ahead.
The next high-impact US news will come sooner, when Fed Chair Janet Yellen gives a speech this evening.
Yellen will be giving acceptance remarks in Washington, but could still touch on monetary policy.
Yellen is being replaced as Chair next year, but could still generate USD movement by suggesting that a December interest rate hike is probable.
There are high hopes that the Fed will hike rates this December, so any further suggestion of a third rate hike in 2017 could inspire a USD advance.
Current Interbank EUR USD Exchange Rates
At the time of writing, the Euro to US Dollar (EUR USD) exchange rate was trading at 1.1566 and the US Dollar to Euro (USD EUR) exchange rate was trading at 0.8644.