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Eurozone Services Data Helps EUR USD Exchange Rate Recover Fed Losses

Euro to US Dollar gains have risen higher in the afternoon’s trading session, hitting 1.09. The 0.7% advance for the Euro comes as the vote on ‘Obamacare’ nears.

Republican voters appear confident of victory in their bid to repeal the Affordable Healthcare Act, which has only further destabilised the already weakened US Dollar.

(First published 10:24, May 4th, 2017)

The Euro has risen by 0.3% against the US Dollar today following the news that Eurozone services activity rose in April. The data helped the Euro recover losses recorded following the Federal Reserve’s surprisingly hawkish policy statement.

  • EUR USD rises to 1.08 – USD EUR trades down at 0.91
  • Eurozone services exceed forecasts – Major drop in Spanish unemployment
  • US Dollar dips despite Fed optimism – US central bank sees ‘temporary slowdown’
  • Euro advance possible on retail sales – Will US Dollar crash on healthcare vote?

The services sector included areas like healthcare and tourism and the Eurozone’s gauge has risen from 56 points to 56.4, showing stable growth across the currency bloc.

The overall composite PMI, covering services, manufacturing and construction, also rose in April.

Further Euro support has come from the Spanish unemployment change number, which showed a drop of -129.3k unemployed persons.

While Wednesday’s US non-manufacturing PMI showed growth, the US Dollar has still fallen. This is mainly due to uncertainty about an upcoming vote, which has also eroded the positive effect of Federal Reserve comments.

The Fed left interest rates at 1% as expected, but officials predicted that growth would pick up again in the future, ‘expand[ing] at a moderate pace’. The chances of a Fed rate hike in June remain high, above 73%.

The Euro could rise further against the US Dollar in the near-term, when retail sales figures for March are announced. Although a monthly slowdown is forecast, an annual rise from 1.8% to 2.1% is also predicted.

This latter result may have the greater impact and push up the Euro US Dollar exchange rate.

Other Eurozone news consists of European Central Bank (ECB) speeches, from officials including President Mario Draghi. Ending the week’s Eurozone news will be Friday’s retail PMI for April, which could trigger a Euro rally if it rises into the growth range.

Two major events will influence the US Dollar today, the first being the trade balance for March. The February deficit of -43.6bn is forecast to expand to -44.5bn, which may further devalue the US Dollar.

The other event will be a second vote on repealing and replacing the ‘Obamacare’ healthcare system, put forward by the Republicans.

The repeal vote was previously halted in March when it was withdrawn due to a perceived lack of support. If it is passed today the US Dollar could crash, given the widespread opposition to the Trump Administration’s healthcare plans.

Even if the vote fails, the US Dollar could still drop as it would strengthen the notion that Donald Trump’s policy changes will continue being blocked in Congress.

Current Interbank EUR USD Exchange Rates

At the time of writing, the Euro to US Dollar (EUR USD) exchange rate was trading at 1.08 and the US Dollar to Euro (USD EUR) exchange rate was trading at 0.91.