At a time of great change in the Eurozone and the US, the prospect of stability for the Euro or the US Dollar seems slim. Future Euro shifts are likely to be tied to the outcomes of 2017’s key elections across the Eurozone.
For the US Dollar, the imminent arrival of a new President in office has raised questions about future trade between the US and the rest of the world, with a possible trade conflict with China limiting demand as investors mull over the issue.
Euro US Dollar Exchange Rate Weakens as: Fed Speeches Boost USD Demand
The US Dollar has been able to effect a recovery against the Euro recently, climbing by a small amount after a string of hawkish Fed speeches.
The most recent of these, a statement from Fed official John Williams, has been in favour of a series of progressive US interest rate hikes. Williams stated that;
‘The FOMC has undertaken a process of raising interest rates. Looking ahead, further gradual increases in the target fed funds rate will likely be appropriate’.
2017 Euro US Dollar Exchange Rate Predictions: Government Unity against Populism Key to Future Euro Stability
The rise of populism across the Eurozone has presented a very real threat when it comes to demand for the Euro,. If this year’s elections go see victory for anti-EU parties, then the single currency may find itself out in the cold when it comes to investor demand.
With right-wing parties in Europe on the rise, the outcomes of 2017’s Dutch, French and German elections will warrant close watching.
Should French parties such as Marine le Pen’s National Front, a particularly Eurosceptic group, take power, then confidence in the Euro is likely to take a knock as it could lead to further fragmentation within the EU and the Eurozone.
US Dollar Demand may Depend on Trump’s Trade Relationship with China after Davos Spat
One of the defining policies of the Trump administration is likely to be the kind of trade relationship established between the US and China. Trump has been seen as leading the two countries towards a trade war, with China looking as though it plans to hold its ground.
Speaking at the World Economic Forum (WEF) event in Davos, Chinese President Xi Jinping made veiled criticism of Trump’s plans to establish a more inward-looking, protectionist US by stating;
‘Pursuing protectionism is like locking oneself in a dark room. Wind and rain may be kept outside, but so is light and air. No one will emerge as a winner in a trade war’.
Escalating the issue was incoming US Senior Advisor Anthony Scaramucci, who dismissed Jinping’s comments as a challenge and declared that anti-US trade policies were;
‘going to cost them [China] way more than it is ever going to cost us, and I think they know that’.
If Trump is able to come to some accord with China on the touchy subject of trading, the US Dollar could rally, but if attempts at diplomacy fail, then the US Dollar, as well as US consumers, could be in for at least four years of high economic turbulence.
Recent Interbank EUR USD Exchange Rates
At the time of writing, the Euro US Dollar (EUR USD) exchange rate was trending in the region of 1.06 and the US Dollar Euro (USD EUR) exchange rate was trending in the region of 0.93.
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