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EUR/USD Exchange Rate Dips as Fed’s Williams Talks Up Three 2017 Interest Rate Hikes

The Euro has slipped against the US Dollar today, although much of the morning’s Eurozone data has been positive. This dip instead comes after a hawkish speech from a Federal Reserve official.

  • EUR USD exchange rate down at 1.1230 – USD EUR rate rises to 0.8900
  • Euro falls despite rising manufacturing activity – Italian GDP posts above forecasts
  • US Dollar bolstered by Fed comments – Are three more interest rate hikes due in 2017?
  • Euro advance possible on incoming ECB speeches – Major US jobs and manufacturing stats incoming

The Euro has fallen marginally against the US Dollar today, but remains near the best weekly rate of 1.1252.

Today’s Eurozone news has been supportive, with Eurozone-wide manufacturing activity rising in May. Additionally, finalised Italian GDP has risen above forecasts in Q1, from 1% to 1.2% on the year.

The US Dollar has still been in greater demand, however, due to recent comments from Federal Reserve official John Williams.

Commenting on future US interest rate decisions, Williams optimistically predicted three more rate hikes in 2017, but also considered that a fourth could also be possible if the economy picked up significantly.

Looking ahead, the Euro could see further movement today from a pair of European Central Bank (ECB) speeches.

Officials Pentti Hakkarainen and Sabine Lautenschlaeger will be speaking; both has the potential to influence Euro demand. Lautenschlaeger is due to discuss ‘policy challenges for the financial sector’, which may entail some mention of interest rate decisions.

If Lautenschlaeger seems confident about raising interest rates, this could be interpreted as a hawkish sentiment, which might boost Euro demand.

Today’s major US news will cover employment changes in May, along with a measure of manufacturing activity in the same month.

The ADP employment change is forecast to show a rise from 177k to 185k, while manufacturing is expected to dip from 54.8 to 54.5. The US Dollar may be unaffected by a balance of positive and negative news, but movement could still be caused by a later announcement from Donald Trump.

The US President is due to make his much-awaited decision on the Paris Agreement, which aims to counteract climate change. While Trump is keeping observers waiting, his prior history of pushing the fossil fuels industry and declaring that global warming is a Chinese invention suggests that the deal will ultimately be rejected.

The US Dollar could rally if Trump does dismiss US involvement in the deal, as it may mean a resurgence in US mining and manufacturing. On the other hand, the fact that major powers like the EU and China are committed to the deal could mean that traders see the US as drifting away from the rest of the world, which may lower confidence in the US Dollar.

Current Interbank EUR USD Exchange Rates

At the time of writing, the Euro to US Dollar (EUR USD) exchange rate was trading at 1.1231 and the US Dollar to Euro (USD EUR) exchange rate was trading at 0.8901.