Euro to US Dollar Exchange Rate Advances as First Trump Weekend Disappoints

January 23, 2017 - Written by John Cameron

STORY LINK Euro to US Dollar Exchange Rate Advances as First Trump Weekend Disappoints

The Euro to US Dollar exchange rate trended flatly for most of Tuesday’s session, though the Euro was able to hold the gains it made against the US Dollar and remain comfortably in the region of 1.0750.

The pair was able to hold its highs due partially to solid Eurozone PMIs published on Tuesday morning, however further advances were prevented due to strong US manufacturing figures.

[Previously updated 23/01/2017]

The Euro to US Dollar exchange rate has gradually advanced so far this year and the new week seems to be continuing that trend as market disappointment in the new US Trump administration has weighed on USD demand.

EUR/USD saw a modest advance last week, from 1.0642 to 1.0701. When markets opened on Monday morning the pair quickly advanced to a six-week-high of 1.0753 and trended slightly below this level at the time of writing.

Euro (EUR) Holds Despite Dovish ECB Tone

The Euro to US Dollar exchange rate continued to trend lower on Tuesday morning, weighed down by disappointing Eurozone PMIs.

As the German and Eurozone Services PMIs fell short of forecast there was little cause for confidence in the single currency, given that much of Germany’s recent strength has been driven by strong consumer spending.

[Previously Updated 23/01/2017]

While the Euro has seen mixed movement in recent weeks, it has still been able to register gains against the US Dollar due to weakening USD sentiment.

The most significant recent news affecting Euro trade was last week’s European Central Bank (ECB) meeting. Following the unsurprising decision to freeze Eurozone monetary policy, ECB President Mario Draghi stated that the Eurozone outlook remained subdued, which was disappointing to investors.

Draghi also stated over the weekend that any country leaving the Eurozone would have to settle its claims and debts with the bloc before withdrawing. This eased some underlying market fears that a Eurozone exit could cause a Euro currency crisis.

US Dollar (USD) Sold as Uncertainty Grows over President Trump’s Plans

The inauguration of Donald Trump as the 45th US President has come and gone, as has the first weekend of his Presidency – without a word of detail into what Trump plans for US fiscal policies.

As these hopes had been the primary reason investors had gone bullish on the US Dollar surrounding Trump’s election, this uncertainty on whether Trump will follow through has weighed on USD demand.

During the first weekend of his Presidency, Trump and his administration focused on a row with the media over the size of the crowds attending his inauguration ceremony.

This, as well as the protectionist stance Trump took during his inauguration speech, added to concerns that the next few years would be highly uncertain ones for the US economy, causing the ‘Greenback’ and its outlook to slip.

EUR/USD Forecast: Trump and Data to Influence Exchange Rates

Traders are likely to be increasingly anxious about USD investment going forwards due to the perceived unpredictability of the US Trump administration.

Any statement Donald Trump makes in the coming week about US fiscal policy or protectionism is likely to have strong effects on the US Dollar, but domestic data could also support the ‘Greenback’.

If US economic data continues impressing, the Federal Reserve may hike US interest rates even without new fiscal stimulus.

Tuesday’s session will see the publication of various important datasets, including the Eurozone’s preliminary January PMI figures from Markit. Over in the US, Markit manufacturing PMI will be published as well as home sales figures for December.

Other stats, such as German business confidence and US Gross Domestic Product (GDP) figures, are due later in the week.

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TAGS: Daily Currency Updates Euro Forecasts