- Euro US Dollar Rate Hits 2 ½ Year High of 1.1777 Wednesday Evening – Steadies Thursday Morning to 1.1712.
- Fed Unanimously Votes to Leave Rates Unchanged – Accompanying Statement Predominantly Dovish
- US Durable Goods and Trade Balance Prove Positive – US Dollar Capitalises, Climbing against Euro
The Euro to US Dollar (EUR USD) exchange rate shot up on Wednesday evening as investors reacted to the news that the Federal Reserve unanimously declined to raise interest rates (as expected), but with an accompanying dovish statement.
Whilst the Fed stuck to their guns on policy, they also acknowledged the weakness of US inflation more overtly than previously, noting that both core and overall inflation had softened and removed the word ‘recently’ that was in the previous statement, suggesting that they perceive the weakening inflation figures as not simply a temporary phenomenon.
Overall this spooked investors and sent the US Dollar briefly tumbling.
On a slightly more contentious note, the Fed asserted that the stimulus wind down is to begin ‘relatively soon’, stating:
‘The committee expects to begin implementing its balance sheet normalization program relatively soon, provided that the economy evolves broadly as anticipated’.
Whilst this isn’t a massively novel announcement – with investors already expecting efforts to reduce the balance sheet ‘this year’, it is nonetheless a slight chronological shift in the semantics of their proposed policy adjustment.
As of Thursday morning, however, the US Dollar has recovered against the Euro, with significant US data releases imminent ranging from the US goods trade balance to jobless claims data.
Robust US Data Releases Punish EUR USD
There was a run of significant US data due today, with the primary mover being the month-on-month US durable goods orders which beat all expectations, smashing the 3% forecast by coming in at 6.5%, way up from the previous -1.1%.
Also significant, June’s advanced trade goods balance beat the consensus of $-65bn and the previous $65.9bn by coming in at $-63.86bn.
Other data was, however, was not quite as positive, with the number of initial jobless claims increasing from 234k to 244k.
The US Dollar was bolstered today as a result, clawing back its recent losses against the Euro.
Euro (EUR) Could Climb Higher with Eurozone Inflation Data Due Tomorrow
There remains even more room for the Euro US Dollar exchange rate to climb this week with tomorrow set to see the release of significant Eurozone ecostats.
France’s inflation figures are projected to drop month-on-month, with a 0.0% previous to -0.4% consensus, but remain steady at 0.7% year-on-year.
Month-on-month inflation in Germany is expected to remain at 0.2%, however year-on-year it is expected to slip from 1.6% to 1.5%. Should this rather miniscule change come to fruition tomorrow then the immediate outlook for the Euro isn’t like to significantly change.
However, should Germany’s inflation rate (Germany being the Eurozone’s chief economy) slip by more than anticipated, anxieties regarding the possibility that the European Central Bank may be pushed to delay winding down its quantitative easing scheme will flourish, causing the pairing to drop.
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