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Euro US Dollar (EUR/USD) Exchange Rate Falls as Draghi Projects Gloomy Eurozone Outlook

European Central Bank

EUR/USD Exchange Rate Sinks on Fears of ECB Rate Cut

The Euro US Dollar (EUR/USD) exchange rate is down by nearly 0.4% today and is currently trading around 1.1185 on the interbank market.

The Euro (EUR) fell against the US Dollar (USD) following dovish comments from Mario Draghi, the President of the European Central Bank (ECB) during his speech in Sintra, Portugal today.

Mr Draghi took a pessimistic view of the Eurozone’s economy, hinting at possible cuts to the ECB’s interest rates should the economy continue to struggle.

Michael Hewson, a Chief Market Analyst at CMC Markets, commented:

‘With inflation once again sliding back close to 1% in May, markets are slowly coming to the conclusion that the ECB is operating at the limits of what it can actually do by way of conventional monetary policy.’

Today also saw the publication of the Eurozone’s ZEW Survey on economic sentiment for June, which shot to a worse-than-expected -20.2, despite the -3.6 consensus.

German economic sentiment also plummeted to -21.1, further leaving EUR traders pessimistic about the Eurozone’s economy.

Achim Wambach, the President Professor at ZEW, commented:

‘The intensification of the conflict between the USA and China, the increased risk of a military conflict in the Middle East and the higher probability of a no-deal Brexit are all casting a shade on the global economic outlook.’

USD/EUR Exchange Rate Edges Higher despite Ongoing US-China Trade Tensions

The US Dollar rose against the single currency despite ongoing trade wars between the US and China causing some concern for the economy, although the Federal Reserve remains silent on the issue.  

Economists at Goldman Sachs commented in their research note:

‘It remains to be seen whether US growth will fall below potential in the back half of the year because of the trade war and related uncertainty. In our view, not enough has changed to warrant a clear signal of an upcoming cut.’

Today saw the printing of the US building permits figures for May, which came in at a better-than-expected 0.3%, despite the forecast -2.9% decrease.

These were followed by the housing starts figures for May which also impressed USD traders, rising above forecast at 1.269m.

EUR/USD Outlook: ECB Interest Rate in Focus

US Dollar traders are looking ahead to tomorrow’s announcement from the Federal Reserve on its interest rate decision.

The rate is expected to hold at 2.5%.

Any dovish comments about the US economy during the monetary policy statement, however, could see the USD lose its edge over the Euro.

Euro traders, meanwhile, will be looking ahead to tomorrow’s German PPI figures for May, which are expected to ease.

Tomorrow will also see a speech by the President of the European Commission, Jean-Claude Juncker.

Any comments about Brexit or the Eurozone economy could provide some uplift for EUR, should there be any signs of a break in the political deadlock.