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Euro to US Dollar Exchange Rate Rises after Mixed Signals from Fed’s Brainard

The Euro to US Dollar exchange rate has risen to 1.1195 today, following an unsettling speech from Federal Reserve official Lael Brainard.

On the positive side, Brainard stated that a US interest rate would be ‘likely appropriate soon’. Less supportively for the US Dollar, Brainard also said that slow inflation might force the Fed to rethink future interest rate decisions.

This has left traders uncertain about the next move from the Fed and has triggered a USD EUR decline.

(First published 11:48, May 30th, 2017)

The Euro has made marginal gains against the US Dollar today, following a varied set of Eurozone confidence figures.

  • EUR USD rate stable at 1.1154 – USD EUR trades down at 0.8962
  • Eurozone business confidence slips – Scores rise for industrial and consumer figures
  • US Dollar unsettled by Trump’s Paris deal refusal – Fed official’s optimism fails to boost USD demand
  • Euro losses possible on incoming German inflation stats – US Dollar may slump on Fed speech

Today’s Euro to US Dollar advance comes in spite of Eurozone business confidence sliding from 1.1 points to 0.9 in May.

This result was accompanied by a services sentiment dip from 14.2 to 13, as well as a slight decline in economic sentiment. More supportively, final consumer confidence moved closer to a positive range in May, while the industrial sentiment score rose from 2.6 to 2.8.

US Dollar weakness has been caused by current market uncertainties, which have partly come from last week’s Trump tour. The US President ended his trip in Italy, where he attended the G7 summit on the island of Sicily.

Problematically, Trump was the only G7 member to not support the Paris climate change deal, instead promising to ‘make my final decision…next week!’.

This blasé attitude to a key piece of environmental legislation has done the President no favours, especially as his previous attitudes make an eventual refusal of the deal a possibility.

Keeping the US Dollar from collapse have been recent comments from Federal Reserve official John Williams. Speaking on the matter of interest rates, Williams optimistically stated that three interest rate hikes in 2017 would ‘make sense’.

Following earlier Eurozone data, the Euro could be moved again by incoming German inflation stats.

Forecasts are for the initial figures to show an annual dip in May, from 2% to 1.6%. Additionally, the monthly print is expected to drop from 0% growth to -0.1%.

Both of these outcomes could weaken demand for the Euro, as they would indicate a slight reduction of German economic growth.

The last US data out today will be a speech from Federal Reserve official Lael Brainard. Brainard is broadly considered a policy ‘dove’, which means that she favours a cautious approach instead of rapid-fire decision making.

Highlighting this characterisation, Brainard previously questioned whether the US was around ‘full employment’ in late May. This reduces the likelihood of her voting for a US interest rate hike in June.

If Brainard does repeat her concerns that the US economy is not ready for a rate hike, then the US Dollar may collapse against the Euro today.

Further ahead, fellow Fed official Robert Kaplan will be speaking on Wednesday. Kaplan is seen as a more neutral policymaker than Brainard, so he could boost USD EUR demand with a hawkish outlook on US interest rates.

Current Interbank EUR USD Exchange Rates

At the time of writing, the Euro to US Dollar (EUR USD) exchange rate was trading at 1.1154 and the US Dollar to Euro (USD EUR) exchange rate was trading at 0.8962.