The US Dollar (USD) is on course to make its best weekly gain in five months against the under pressure Euro (EUR) as investors look ahead to the evenings Jackson Holes speeches by the heads of the European Central Bank and US Federal Reserve.
Demand for the US Dollar increased in Friday as concerns over the situation in Ukraine increased yet again after Lorries from a Russian aid convoy crossed the Ukrainian border without permission from Kiev.
Moscow accused Ukraine of obstructing the aid convoy, which is destined for the war torn city of Luhansk.
Heavy fighting in the city between government forces and pro-Russian Separatist rebels has intensified in recent days as Kiev launched all out offensive in an attempt to crush the separatists.
The USA’s military activity in Iraq was speculated to be coming close to an increase as leading US commanders said that the Islamic State must be destroyed as it poses the gravest threat to the USA in recent years.
General Malcolm Dempsey branded the terrorist group as an ‘organisation that has an apocalyptic, end-of-days strategic vision and which will eventually have to be defeated’.
Before the news broke of the Russian convoy entering Ukraine the Euro had managed to edge away from an 11-month low as investors embarked on a bout of profit taking and turned their attention to speeches due to be given by European
Central Bank President Mario Draghi, and Federal Reserve Chairman Janet Yellen at the Jackon Hole symposium.
Economists will be watching both speeches closely to try to garner the direction both Central Banks are planning to go.
Expectations are growing that the ECB will have to announce new monetary easing measures in order to tackle the threat of low inflation and a stagnating economy.
US Dollar to Euro Exchange Rate Forecast
Fed Chair Janet Yellen is widely expected to talk about the improving US labour market and mention the positive picture regarding the USA’s unemployment rate.
She is however also expected to stick to her guns by saying that the Central Bank should be cautious about raising interest rates too soon.
If her comments are dovish then we can expect the ‘Greenback’ to retreat slightly against its major peers.
However, if the speech is more hawkish the US Dollar will likely climb to a new 11-month high or even higher.
The Euro will likely see movement from Draghi’s speech.
The main factor in his comments will be whether he hints at new monetary easing measures being introduced at the Central Banks next policy meeting.
Economists will also be keeping a close eye on geopolitical events in Ukraine and Iraq.
US Dollar (USD) Exchange Rates
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
US Dollar,
,Pound Sterling,0.6031 ,
US Dollar,,Euro,0.7532 ,
US Dollar,,Canadian Dollar,1.0949 ,
US Dollar,,Australian Dollar,1.0730 ,
Pound Sterling,,US Dollar,1.6584 ,
Euro,,US Dollar,1.3276 ,
[/table]
Comments are closed.