- EUR USD Hits 1.1582 – USD EUR Climbs to 0.8630
- Possibility of US Tax Reform Delay Raises Concerns – ‘Greenback’ Retains Lead
- French Trade Deficit Widens – EUR Remains on the Back Foot
The Euro US Dollar exchange rate continued to slide today despite news that Senate Republican leaders could be considering a one-year delay to the implementation of US President Donald Trump’s tax reform plan.
France’s Trade Deficit Widens, EUR Exchange Rates Encumbered
The Euro remained encumbered against the US Dollar today as markets digested mixed data releases from the Bloc.
Chief amongst these was France’s trade deficit, which reportedly widened in September to 4.7 billion Euros, up from the previous period’s 4.2 billion.
The French Customs Office reported that imports outpaced exports due to a drop in the sale of oversea industrial machinery and agricultural products.
This news proved to be somewhat of a surprise, with economists predicting that the deficit would shrink to -4.1 billion Euros, rather than expand.
Yesterday it was revealed that industrial production in Germany fell to -1.6% in September missing the forecast of a 0.8% gain and marking the worst drop since December 2016. This disappointing result was predominantly caused by falling production in capital goods, intermediate goods, consumer goods and the energy sector.
In slightly more positive news, however, retail sales in the Eurozone smashed expectations yesterday by climbing year-on-year at 3.7%, above the forecast of 2.7% and the previous period’s 2.3%.
Whilst this news did offer some buoyancy for the Euro, the bad news ultimately negated the good, leaving the Euro at the mercy of the US Dollar.
Possible US Tax Reform Delays Raise Concerns – US Dollar Exchange Rates Remain Resolute
The ‘Greenback’ briefly slipped today, inhibited by talks from unidentified sources that Senate Republican leaders are considering a one-year delay to the implementation of the major corporate tax reform in order to effectively comply with Senate rules.
Trump’s tax reform has originally been cited as a ‘Christmas gift’; due to arrive before the end of this year, but the possibility that the corporate tax portion could be delayed has led many to question this prospect.
Derek Halpenny, MUFG’s European head of global markets research in London, shared this sentiment, asserting that a delay could potentially embolden members of congress to oppose his other plans and have a knock-on effect on the Dollar.
‘If the story is true that they’re considering a delay of one year to corporate tax cut,… big differences (among members of Congress) will need to be sorted, so we continue to be dubious on that proceeding’.
Ultimately, however, the US Dollar has remained resolute, inching ahead against the Euro on the back of ongoing optimism regarding a potential rate hike from the Federal Reserve in December.
EUR USD Forecast: Fed Rate Hike Hype Propels US Dollar
The forecast for EUR USD remains firmly in the US Dollar’s favour, with market anticipation for a Federal Reserve rate hike in December continuing to gain steam.
The Fed’s accompanying statement at the November policy meeting left very little doubt in economist’s mind that a rate hike is approaching, with current Fed Chairman Janet Yellen asserting that the economic damage caused by the recent late-summer storms remains minimal and will not be long-lasting.
Whilst the statement also acknowledged that inflation remains low, the overwhelming sentiment contained within is that it will steadily reach target levels and that the outlook for the US economy is solid.
Notable data tomorrow will feature the US jobless claims figures, as well as the German trade balance and the ECB economic bulletin.
If the US jobless claims figures expand as forecast then the ‘Greenback’ might come under pressure. If, however, the Bloc’s data prints remain mixed then the USD w