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EUR to USD Exchange Rate Tests Monthly Highs on Cautious Optimism in Eurozone

March 20, 2017 - Written by Ben Hughes

The Euro to US Dollar exchange rate surged on Tuesday, hitting its best levels since early-November 2016 following Monday’s televised French election debate.

The debate saw centrist front runner put in a strong performance against his anti-EU opponent Marine Le Pen. As bets of a Macron win increased, the Euro saw relief from its recent populism jitters.

[Previously updated 20/03/2017]

Last week saw the Euro to US Dollar exchange rate make a solid advance following the results of last week’s Dutch election, as well as the cautious tone of the Federal Reserve weakening ‘Greenback’ demand.

EUR/USD began last week trading at 1.0674 and ended the week over half a cent higher at 1.0750. On Friday the pair hit a high of 1.0781 – its best levels since the beginning of February.

EUR Benefits from Hopes of Avoiding Anti-EU Votes in 2017



After last week’s general election in The Netherlands, investors are feeling a little more confident about the future of the Eurozone.

While analysts agreed there was very little chance anti-EU candidate Geert Wilders could win enough seats to take power in last week’s Dutch election, traders are reassured by his distance-second place win regardless.

A new poll of the upcoming French election published over the weekend also left investors hopeful. Bets are increasing that centrist candidate Emmanuel Macron could beat anti-EU candidate Marine Le Pen in the first round, despite Le Pen previously enjoying a sizeable lead in first round polling.

This, as well as recent solid ecostats from the bloc have bolstered hopes among markets that the Eurozone will remain steady in 2017.

USD Fails to Benefit from Latest US Data



After last week’s Federal Reserve news, US Dollar investors seem largely uninterested in any data that does not alter Fed rate hike bets or the US interest rate outlook for 2017.

While the Fed did indeed hike US interest rates last week, it also repeated its previous cautious tone. Its statement indicated that US interest rates could be hiked around twice more in 2017.

Due to recent strong US data, investors had been hoping for the Fed to increase the pace of rate hikes. Some traders had hoped for as many as four of five rate hikes throughout the year.

However, the Fed’s cautious tone led some to see the US Dollar as overvalued. A lack of news on fiscal policy from US President Donald Trump has also weighed on market optimism around USD.

EUR/USD Forecast: Movement to be Quiet in Early-Week Trade



A lack of key influential ecostats or events due for the first half of this week could leave the Euro to US Dollar relatively close to its current levels, testing highs on the improved Eurozone outlook.

Wednesday’s data may cause some limited movement. The Eurozone’s January current account figures will be published. Wednesday’s US data includes mortgage application data from MBA, house prices from January and home sales from February.

The main drivers for this week’s EUR/USD trade will come later in the week.

Thursday will see the publication of GfK’s April consumer confidence survey for Germany, the European Central Bank’s (ECB) latest economic bulletin and the Eurozone’s preliminary March consumer confidence print.

Thursday is likely to be the main event of the week for US Dollar traders as Federal Reserve Chairwoman Janet Yellen will be holding a speech at around midday.

Any indication from Yellen that the bank could begin to adopt an even more hawkish outlook or a faster pace of monetary tightening would give the US Dollar a significant boost.

The week will be rounded off on Friday by the Eurozone’s preliminary March PMIs from Markit, which is likely to set the tone for Euro trade for next week too.
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