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Euro US Dollar (EUR/USD) Exchange Rate Forecast: Is the US Dollar About the Get Caught Up in a Currency War?

EUR/USD Exchange Rate Rallies as Trump Remarks Stoke Currency War Fears

The Euro US Dollar (EUR/USD) exchange rate is currently holding steady this morning, after surging late on Thursday following some remarks from President Trump which stoked fears of a possible currency war.

At the time of writing EUR/USD exchange rate is virtually unchanged this morning, with the pairing up by over half a cent from Thursday’s worst levels.

Will the Euro US Dollar (EUR/USD) Exchange Rate be Rocked by a US Led Currency War?

The Euro US Dollar (EUR/USD) exchange rate looks set to be met by further volatility this month as markets were given yet another thing to worry about, the possibility of a currency war.

This comes after Donald Trump lunched a surprise attack on the Federal Reserve, in which he derided the central bank for continually raising interest rates and consequently increasing the value of the US Dollar.

Trump suggested the Fed decision to press ahead with its monetary tightening risked undermining the recent growth in the US economy.

Speaking in an interview with CNBC, Trump addressed the recent rate hikes from the Fed, saying:

‘I don’t really — I am not happy about it. I don’t like all of this work that we’re putting into the economy and then I see rates going up.’

Trump’s remarks came on the same day as markets saw the Peoples Bank of China (PBOC) allow a sharp sell-off in the Chinese Yuan (CHY), devaluing the currency in what was seen as a response to US trade tariffs.

Markets now fear that Trump will pursue his own devaluation in the US Dollar, something which could led to a full-blown currency war and prompt considerable volatility in markets.

EUR/USD Exchange Rate Forecast: Eurozone PMI and ECB Meeting to Drive Euro Movement

Looking ahead to next week movement in the EUR/USD exchange rate looks to be dominated by Eurozone data for much of the session.

This started with the release of the Eurozone’s latest PMI figures, with a suspected decline in private sector activity this month likely to drive the Euro lower.

These losses in the EUR exchange rate may be accelerated on Thursday, with the European Central Bank (ECB) expected to remain dovish, especially in the face of both rising trade protectionism and now currency war fears.

However the US Dollar will have an ace up its sleeve next week, with the USD exchange rate potentially rocketing higher at the end of the session with the release of the latest US GDP figures.

Economists forecast the US economy will have boomed in the second quarter, with growth expected to have soared from 2% to 4% in the three months to June.