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USD/EUR Exchange Rate Climbs as ECB Rate Hike Hopes Diminish

The US Dollar continued to make gains against the Euro today after recent dovish comments from the ECB’s chief economist Peter Praet weighed on the single currency.

When discussing the need for the central bank to use stimulus in support of the domestic economy, Praet said that while the stimulus deployed so far has been effective;

‘Our mission is not yet accomplished. We need patience and persistence. We need to be patient, because inflation convergence needs more time to show through convincingly in the data. The Euro area’s economic environment is improving, and the fat negative tail to inflation expectations, which was so visible at the start of our asset purchase programme, has virtually disappeared.’

ECB Not Discussing Making Changes to Monetary Policy

ECB governing council member Benoit Coeure also took a similar tone today, announcing that the central bank had not been discussing making changes to monetary policy.

These statements contradict last week’s hawkish comments made by ECB President Mario Draghi and combined they lend further credence to the theory that ECB policy will be left alone for the rest of 2017.

With the likelihood of the ECB winding in quantitative easing seemingly decreasing, the Euro to US Dollar exchange rate has suffered.

Eurozone Experiences Strongest Quarterly Economic Growth in Six Years

The Eurozone received some good news today in the form of the Eurozone service PMIs, with the final June headline figure printing at 56.3, lower than May’s 56.8, but still better than the 55.7 expected. Even if June’s figure was less than May’s, the Eurozone has enjoyed its best quarter in some six years, with strong inflows of work and solid business confidence keeping a high pace of job creation. The Euro, however, seemed decided in its dovish stimulus-related plunge.

USD/EUR Strong before Federal Reserve Minutes

Otherwise bearish, the US Dollar has been able to continue climbing against the Euro – a rise afforded by the Euro itself struggling as stimulus adjustment rumours are dispelled.

Today markets are eagerly awaiting the Federal Reserve’s meeting minutes, which will give an insight into the Fed’s attitude to future policy adjustments. Predictions are currently somewhat split on the subject, so US Dollar movements in either direction are viable. If the fed’s attitude is deemed hawkish, the appeal of the US Dollar will be bolstered, if the outlook is deemed dovish, however, then the ‘Greenback’ could be put under some pressure, driving the EUR/USD exchange rate to a tighter band.

Also due out today is data on US factory orders and durable goods orders, with factory order growth expected to decelerate  -0.5% following the previous month’s drop of -0.2%. If the data turns out to be better than expected then the US Dollar will likely strengthen, but all gains or indeed losses are dependent on the content of the Fed’s minutes.

Current Interbank Exchange Rates

At the time of writing the US Dollar to Euro (USD EUR) exchange rate is trading at 0.8823. Conversely the Euro to US Dollar (EUR USD) exchange rate is trading at 1.1331.