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US Dollar to Euro Exchange Rate Tight as Fed Leadership comes into Question

The US Dollar has failed to make any headway against the Euro today, with both currencies trading in a narrow range.

  • USD EUR rate tight at 0.8498 – USD EUR rate near 1.1765
  • US Dollar tight on Cohn news – Uncertainty about Federal Reserve leadership
  • Euro unaffected by Bundesbank outlook – Bank reports faster-than-forecast German growth
  • US Dollar could decline on PMI data – Euro may also fluctuate on PMI stats

The USD EUR exchange rate has been in the region of 0.8498 today, a step down from the high of 0.8559 seen on August 17th.

US Dollar Unsettled by Fed Leadership Fears

With little direct data to refer to today, US Dollar traders have instead been looking at the future of the Federal Reserve. The US central bank will be at the Jackson Hole Symposium on the coming weekend, but traders are looking to the more distant future.

The main concern is over who will be leading the Fed in the future. Current Chair Janet Yellen has been on the job since 2014, but there are low expectations of her remaining in the position when her term ends in February 2018.

While this is still a way off, economists are already looking to Yellen’s possible successor, Gary Cohn. Currently embedded in White House politics, Cohn would represent one of Donald Trump’s personal choices for the role if he did become Chair.

Giving his view on the matter was Wells Fargo economist Richard DeKaser;

‘We have an unconventional president, so it is not unusual that we could have an unconventional Fed nominee’.

Euro Trades Tightly despite Bundesbank Optimism

The Euro has been unable to advance against the US Dollar today, following a statement from German central bank Bundesbank.

The good news has been that German economic growth may be even faster than expected. In the words of Bundesbank analysts;

‘The Bundesbank believes that the German economy is likely to continue to grow with strong momentum in the current quarter, too. This is suggested…by the exceptionally upbeat sentiment among both enterprises and consumers as well as the positive order situation in the industrial sector.

The underlying pace of economic activity, which was already quite strong in the previous year owing to buoyant domestic activity, recently accelerated again given a more favourable external environment, the report continues’.

While this has been an optimistic outlook from Bundesbank, it has unfortunately failed to push the Euro up against the US Dollar.

US Dollar to Euro Forecast: Losses Possible on US PMI Figures

The US Dollar may struggle against the Euro in the middle of the week, if US data releases match with forecasts.

On Wednesday, US preliminary manufacturing figures are tipped to show a decline in overall activity, via the composite PMI. Services sector activity is expected to rise, but an overall composite decline would still represent negative news for the US.

The US Dollar could also be influenced by a speech later on Wednesday, from Fed official Robert Kaplan. Kaplan is largely considered a neutral policymaker, so it is difficult to predict whether he could issue a hawkish or dovish statement on monetary policy.

Key Eurozone data will be out sooner than US announcements, with ZEW surveys of economic confidence coming on Tuesday. In August, both Eurozone and German confidence is tipped to decline, which may trigger a near-term EUR USD decline.

In a similar situation to the US, however, Eurozone PMI stats are also forecast to decline on Wednesday. Which currency ends up on top in this situation is largely dependent on how much of a setback traders consider slowing economic activity.

Current Interbank USD EUR Exchange Rates

At the time of writing, the US Dollar to Euro (USD EUR) exchange rate was trading at 0.8498 and the Euro to US Dollar (EUR/USD) exchange rate was trading at 1.1765.