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Euro US Dollar Exchange Rate Softens Ahead of ECB Commentary

Ahead of fresh commentary from various members of the European Central Bank (ECB) the mood towards the Euro remained bearish.

Markets expect policymakers to maintain a generally dovish tone on monetary policy, with the prospect of any tapering of the quantitative easing program likely to remain severely limited.

Although the Eurozone economy has demonstrated strong signs of growth in recent days the outlook of the ECB is unlikely to have shifted materially.

As analysts at Westpac noted:

‘More broadly on growth, back-to-back gains for the Euro Area at a 2% annualised pace have certainly given the market confidence that an end to alternative easing in the region is in sight. Though we argue that, with core inflation well away from target, the market has got ahead of itself.’

The Euro US Dollar exchange rate could extend its losses further once ECB President Mario Draghi speaks this evening, unless he proves more optimistic in outlook.

Some jitters are also likely as the Greek parliament votes on the latest raft of creditor-mandated tax reforms and pension cuts.

While the government’s majority is slim the bill is still expected to pass, even though opposition MPs have universally pledged to vote against it.

Nevertheless, signs of mounting tensions within the Hellenic nation are unlikely to encourage any particular sense of confidence in the Euro.

Ahead of the weekend the single currency could find some support if the Eurozone consumer confidence index for May shows an upwards revision.

In spite of mounting concerns over developments in the White House demand for the US Dollar picked up on Thursday morning, meanwhile.

Speculation that Donald Trump could be facing potential impeachment over claims he attempted to interfere in the FBI investigation into Michael Flynn has weighed heavily on the ‘Greenback’.

Markets are concerned that Trump’s promised tax reforms and fiscal stimulus measures may never come to fruition as the scandal deepens, prompting the US Dollar to fall to a six-month low.

Political jitters have also dented the likelihood of the Federal Reserve raising interest rates in June, putting additional downside pressure on USD exchange rates.

While the EUR USD exchange rate struggled to hold onto its gains for long a fresh rallying point could be in store if the latest US jobless claims figures prove disappointing.

Any indication that the labour market is faltering may undermine the appeal of the US Dollar further, especially if political developments in the US continue to spook investors.

Current EUR USD Interbank Exchange Rates

At the time of writing, the Euro US Dollar exchange rate was trending lower around 1.1136. Meanwhile, the US Dollar Euro exchange rate was making some modest gains in the region of 0.8978.