- Euro US Dollar Exchange Rate Edges Up to 1.12 – Up from last week’s 1.11 lows
- Macron’s Party Performing Strongly in French Legislative Elections – Euro advances
- EUR Update: ZEW Surveys Mixed – Eurozone inflation later in the week
- USD Forecast: Federal Reserve Meets Wednesday – Fed expected to hike US interest rates
Euro US Dollar Exchange Rate Higher Ahead of Fed Meeting
The Euro US Dollar exchange rate has edged higher since the weekend but has failed to advance above Monday’s high of 1.1226. On Tuesday EUR USD trended just above the level of 1.12.
Optimism about the French legislative elections was short lived and failed to support the shared currency much more after Monday’s session ended.
Tuesday’s Eurozone economic sentiment surveys from ZEW were mixed. German sentiment slipped but overall Eurozone sentiment was better than expected. This weighed on EUR USD strength on Tuesday.
Anticipation for the Federal Reserve’s policy decision on Wednesday has also kept the pair from advancing too far. Developments from Tuesday night’s testimony to US Congress from Attorney General Jeff Sessions may also impact the US Dollar. These will be the biggest influences of EUR USD movement throughout Wednesday and Thursday.
[Published 12:04 BST 12/06/2017]
The Euro US Dollar exchange rate dropped last week as the European Central Bank (ECB) cut its Eurozone inflation outlook and jitters surrounding US President Donald Trump faded slightly.
EUR USD dropped from 1.1280 to 1.1195 last week. However, on Monday the pair began to advance again as investors reacted to the weekend’s French legislative elections news.
Euro (EUR) Bolstered by Projected Strength of Emmanuel Macron’s Party
The Euro saw an increase in demand on Monday as investors reacted to the weekend’s news from the first round of France’s 2017 legislative elections.
In the last month investors have been concerned that French President Emmanuel Macron’s party, La République en Marche (LREM), would not find the support it needs for Macron to comfortably run the nation. This is because Macron’s party is still just about a year old.
However, the first round of France’s legislative elections saw Macron’s party win a huge 32.32% of the vote, beating the conservative LR party’s 21.56% and far-right FN’s 13.2%.
According to projections, next Sunday’s second round could see Macron’s party winning a significant majority of 415-455 seats in the National Assembly.
If LREM does indeed win this many seats it would make the largest parliamentary majority for one party in France since the end of the Second World War.
This has increased market confidence in the new French Presidency, as well as faith in Macron’s ability to strengthen France and the Eurozone.
It wasn’t all good news however, as voter abstention in the legislative election hit a record high of 51.29%, indicating that many members of the French public may be disillusioned by the available options.
Monday’s Eurozone data had little effect on the Euro, but markets appeared to have digested and moved past last week’s European Central Bank (ECB) news.
US Dollar (USD) Mixed Ahead of Fed Meeting
US data published towards the end of last week was relatively low influence and as a result investors have had little reason to buy up the US Dollar.
Last week’s most anticipated event for USD traders was a US Congress testimony from ex-FBI director James Comey on the circumstances that led to his firing by US President Donald Trump.
However, Comey’s testimony didn’t offer any big surprises or developments. As a result, market concerns that Trump could see a drop in support from Congress faded slightly and traders continued to hope that Trump would eventually pass ambitious tax and infrastructure policies through.
This saw investors buying the US Dollar towards the end of last week as political uncertainties lightened. The ‘Greenback’ easily benefitted against a weaker Euro following last week’s European Central Bank (ECB) news.
This week, US Dollar traders expect the Federal Reserve will hike US interest rates for the second time in 2017.
This is already largely priced into the US Dollar so the ‘Greenback’ saw mixed movement on Monday amid a lack of fresh appeal.
Euro US Dollar Forecast: Fed Meeting and French Legislative Election Ahead
There’s another busy week ahead for the Euro US Dollar exchange rate, as investors will be reacting to France’s legislative elections next Sunday and the Federal Reserve’s June policy meeting on Wednesday.
The Fed is expected to hike US interest rates and indicate that US rates will be hiked one more time before the end of the year. Any deviation from this expectation is likely to cause big USD movement.
For example, if the Fed hikes rates and indicates that there could be as many as two more rate hikes before the end of the year, the US Dollar will soar.
On the other hand, if the Fed unexpectedly leaves rates frozen or hints that the rate hike outlook has been downgraded in any way due to economic or political uncertainty, the US Dollar would plummet.
In this scenario, the Euro US Dollar exchange rate would be likely to see big gains this week.
Economic data also has the potential to influence EUR USD movement. ZEW will publish its June economic sentiment surveys for Germany and the Eurozone on Tuesday and Germany’s final May inflation stats will be published on Wednesday. The Eurozone’s overall final May inflation data will come in on Friday.
As for US data, besides the Fed meeting Wednesday will also see the publication of US inflation and retail sales stats for May.
EUR USD Interbank Rate
At the time of writing this article, the Euro US Dollar exchange rate trended in the region of 1.1215. The US Dollar to Euro exchange rate traded at around 0.8915.