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Will Trump Speech Drive Euro US Dollar Lower?

The Euro US Dollar (EUR USR) exchange rate is paralysed this morning as markets await Donald Trump’s first official Presidential address.

The speech, set to start at 9.00pm local time is eagerly anticipated by investors as they hope the President will outline some of his economic policies for the first time since entering office over a month ago.

The US Dollar initially rallied following the election of Trump back in November as traders speculated that his campaign promises to increase infrastructure spending and cut bureaucratic red tape would boost growth.

However this ‘Trump jump’ has so far eluded the ‘Greenback’ since his inauguration as his administration declined to release its economic plans, instead focusing on immigration and pursuing a more isolationist agenda.

Today’s speech will be the first real test of the new administration, with investors waiting to see if it can deliver the President’s ambitious stimulus package.

Economists are likely to be slightly disappointed however at the lack of tax plans as Trump’s ‘phenomenal’ tax reforms are not likely to be make an appearance.

Naeem Aslam, chief market analyst at Think Markets UK, said;

‘It turns out that we are not going to receive any details about the anticipated tax plan and the timeframe for said plan is also vague. All we know is that it will happen sometime after a new healthcare bill replacing Obamacare has been introduced.’

The speech follows an announcement on Monday that the new administration plans to raise military spending by $54bn, while cutting domestic programmes and foreign aid and traders will be looking for information on how this will impact government spending.

Ultimately future movement in the US Dollar will be determined by market reaction to the speech. Should it convince investors that he can deliver upon his promises for growth and reform then USD EUR is likely to shoot up.

Conversely if analysts find that the math doesn’t quite add up or if his promises seem over ambitious then the Euro may be able to climb higher once again, especially after the recent uptick in Eurozone data.

Ecostats released today show that the Eurozone is still seeing encouraging growth within the major economies.

French GDP rose by 0.4% at the end of last year, rising from 0.3% in the three months to September, with France’s economy showing encouraging growth after a slight contraction in the second quarter.

Italy also impressed investors as the inflation rate jumped from 1% to 1.5% in February, reaching a two year high and dispelling fears that Italy’s ongoing banking crisis was negatively impacting the economy.

Looking ahead the release of German economic data is likely to strengthen the Euro tomorrow if it performs as well as predicted.

Germany’s unemployment rate is expected to hold at a 36-year low of 5.9% in February, while inflation is forecast to be revised up from 1.9% to 2.1% over the same period, which is likely to put increased pressure on the European Central Bank (ECB) to consider rising interest rates.

Meanwhile excluding Trump’s speech the most notable US data event today is the release of the latest fourth quarter GDP estimate, which may aid in the US Dollar’s downfall as economists predict that growth in the last three months of 2016 fell from 3.5% to 2.1% following a contraction in exports and government spending.

Current Interbank Exchange Rates

At the time of writing the EUR USD exchange rate was trending around 1.06 and the USD EUR exchange rate was trending around 0.94.