The Euro has depreciated against the US Dollar on Friday afternoon, from an opening rate of 1.1806 to 1.1766.
As the lengthy German coalition process drags on, there have been growing uncertainties about what kind of compromises the CDU/CSU parties will need to reach.
It is expected that the CDU/CSU parties will be able to form the theorised ‘Jamaica’ coalition, but there could be many more months of difficult talks ahead before this.
(First published October 20th, 2017)
- EUR USD trades down at 1.1806 – USD EUR rate rises to 0.8468
- Euro slides on EU Commission’s outlook – EC urges rising standards across currency bloc
- US Dollar advances on budget news – Republicans move closer to tax reforms
- Will Euro recover on confidence stats? – US Dollar could firm on budget statement
In the US, the historic approval of a budget resolution has inspired great confidence among traders, leading to widespread US Dollar gains.
Euro Slips as EU Commission asks for Greater Unity
In addition to the Eurozone current account declining today, the Euro has also been dragged down by recent comments from European Commission (EC) officials.
Looking at the difficulties faced by Eurozone countries, EC official Pierre Moscovici said;
‘Economic and social divergences matter for the Euro area for its daily functioning but also for its political acceptability.
They undermine the promise of shared prosperity, which was central to the creation of the Euro in the first place. And they fuel populism in regions were inequalities have been felt more strongly’.
Moscovici has made some suggestions for the future, stating;
‘For the Euro to reach its full potential, we cannot let these economic and social divergences persist. The Economic and Monetary Union (EMU) is our main tool for convergence in the Euro area’.
If the Eurozone is seen as still struggling because of continued divisions, the single currency may remain soft against the US Dollar.
US Dollar Ticks Up as 2018 Budget Bill Gains Momentum
As part of the marathon effort to actually pass some of Donald Trump’s policy reforms, the Republican Party has made historic progress in the Senate.
Having passed the initial budget measure by a slim majority, Republicans are now on track to implement significant tax cuts which will supposedly benefit the worse-off.
While there are still deep reservations about the real benefits of the proposed tax changes, this step towards policy change has triggered a sharp rise for the US Dollar.
The Republicans are still licking their wounds from failing to ‘repeal and replace’ the Affordable Care Act earlier in the year, so the pressure is on to pass these tax reforms.
Euro Recovery possible on Upcoming Eurozone Confidence Data
The Euro has a chance to advance against the US Dollar on the coming Monday, when a confidence estimate is announced during the afternoon.
The October consumer confidence flash is forecast to improve, from a prior -1.2 point figure to a slightly better -1 point score.
Before then, however, the US Dollar could make further gains in the USD/EUR pairing.
This afternoon will bring the announcement of September’s budget statement, which is forecast to show a significant improvement.
A -108bn deficit was recorded in August, but economists predict a surplus of 6bn to be announced today.
There will also be a speech from Federal Reserve official Loretta Mester at the same time. Mester is seen as a slightly hawkish policymaker, so could trigger further USD gains by backing a December interest rate hike.
Current Interbank EUR USD Exchange Rates
At the time of writing, the Euro to US Dollar (EUR USD) exchange rate was trading at 1.1806 and the US Dollar to Euro (USD EUR) exchange rate was trading at 0.8468.