The Euro US Dollar (EUR USD) exchange rate slid from its best levels today as markets were relieved to hear that the US government should avoid a shutdown later this week.
The ‘Greenback’ was bolstered as US President Donald Trump reportedly backed down on his demand for funding for his US-Mexico border wall to be included in the national budget.
Markets were buoyed by the news as it increased the likelihood of congress coming to an agreement over the budget before the end of Friday and therefore avoiding a government shutdown which would have likely weighed on the US Dollar.
In a press conference of Tuesday, Senate minority leader Chuck Schumer said;
‘The president’s 11th-hour demand threatened to upend the progress. We’re pleased he’s backing off. The fact that the wall is now off the table – Americans should breathe a huge sigh of relief, the negotiations can resume and move forward.’
Democrats were fervently opposed to the allocation of US federal funds for the controversial border wall, which was a key pledge in Trump’s election campaign. However with Trump signalling he would no longer push for it to be included in the budget, congressional leaders were confident yesterday that the two sides would reach a bipartisan agreement ahead of Friday’s deadline.
The EUR USD exchange rate was also weakened this morning as markets braced for the possibility that Trump will finally outline his fiscal plans later today.
Whitehouse sources have suggested that the President will announce this afternoon that he is seeking to cut corporation tax from 35% to 15%, while implementing a reduction in income tax rates for those on middle incomes.
While the move would reduce government revenues, Trump’s economic advisors believe that the tax cut would pay for itself in the long run by encouraging more economic activity.
USD investors have been eagerly awaiting Trump’s economic policies since his inauguration in January, with his promise of ‘radical’ tax reform and increased infrastructure spending driving much of the US Dollar’s strength in recent months.
Meanwhile the Euro continues to show resilience following the first round results of the French Presidential election over the weekend.
As analysts had predicted, Independent centrist Emmanuel Macron is now set to face off against far-right Eurosceptic Marine Le Pen in the run-off next month.
While Le Pen has made efforts to appeal to a wider demographic by distancing herself from the National Front Party earlier this week, polls are still currently favouring the Pro-EU Macron to win with around 61% of the vote, helping to strengthen the single currency.
However observers are unwilling to rule Le Pen out of the running yet as her strong stance on security and immigrations continues to resonate with a large portion of the electorate following a number of deadly terror attacks in recent years.
Looking ahead the EUR USD exchange rate may rally later this afternoon if French employment stats show a decline in the total number of jobseekers last month.
Meanwhile the US Dollar is likely to be tied closely to the reaction from investors to Trump’s proposed tax reforms this afternoon, although on the data front USD could be weakened if the number of US mortgage applications continued to fall last week.
Current Interbank Exchange Rates
At the time of writing the EUR USD exchange rate was trending around 1.08 and the USD EUR exchange rate was trending around 0.91.