Euro US Dollar (EUR/USD) Exchange Rate Capitalises on US Government Shutdown
The Euro US Dollar (EUR/USD) exchange rate hit the ground running on Monday as markets reacted to the ongoing US government shutdown.
With pertinent data for the Eurozone lacking, markets instead focused on the situation in the US after Sunday’s failed Senate debate.
A vote to end the shutdown with a short-term (three week) spending bill is expected today, although issues regarding immigration remain a point of contention.
This exacerbated the negative sentiment towards the American currency, though the looming European Central Bank (ECB) policy decision could quickly shift things back into the US Dollar’s favour.
Euro (EUR) Exchange Rates Bolstered as SPD Agree to Begin Formal Coalition Negotiations
Germany’s Social Democrat Party (SPD) have officially agreed to begin formal coalition negotiations with Chancellor Angela Merkel’s Christian Democratic Union (CDU) after the SPD narrowly ruled in favour of formal talks.
There had been concerns that the SPD might reject plans for a new ‘grand coalition’, particularly after senior members lambasted the contents of the negotiation blueprint last week.
These concerns seem to have temporarily eased, with the decision now effectively paving the way for serious negotiations to begin – good news for investors who were worried that a lack of leadership might prompt a return to the polls.
Merkel struck an optimistic tone in response to this news, stating:
‘We are doing (coalition talks) in order to bring the people in our countries even closer together. And we do it to give the whole of Europe a new boost, to make it even stronger’.
The effect on the Euro US Dollar (EUR/USD) exchange rate was minimal, however, with markets still pricing in the possibility that talks could fail somewhere down the line.
EUR/USD Exchange Rate Forecast: Eurogroup Meeting and World Economic Forum Ahead
The Euro US Dollar (EUR/USD) exchange rate could encounter some volatility today depending on what occurs at three notable events; the Eurogroup meeting, the 2018 World Economic Forum and the coming US vote to push for three weeks of government funding.
ECB President Mario Draghi is expected to attend the Eurogroup meeting, an opportunity he might use to discuss the Eurozone economy.
It’s unlikely that he will use the meeting to discuss monetary policy, however, with the ECB’s January policy decision looming.
The World Economic Forum is a four-day event in Switzerland with the likes of US President Donald Trump, French President Emmanuel Macron and UK Prime Minister Theresa May in attendance.
Comments from Trump could push support for the US Dollar, though markets will most likely be far more concerned with the outcome of the Senate vote on the US government funding. It is also unlikely that comments from Macron will have much an effect on the Euro’s standing.