EUR to USD Exchange Rate Could End Week Near Multi-Month Highs

May 5, 2017 - Written by John Cameron

STORY LINK EUR to USD Exchange Rate Could End Week Near Multi-Month Highs

After fluctuating earlier in the week, the Euro to US Dollar exchange rate gained almost a cent on Thursday as markets reacted to a strong TV debate performance from pro-EU French Presidential candidate Emmanuel Macron.

EUR/USD began this week trending at the level of 1.0896. After briefly hitting a low of 1.0876 on Thursday morning, the pair surged to a high of 1.0987.

This was the pair’s best level since the election of US President Donald Trump in November 2016 and the pair remained near these highs on Friday.

Most of the Euro’s strength this week has been related to French Presidential election hopes. The final round of the key election takes place on Sunday the 7th of May.

At the end of April, pro-EU centrist Emmanuel Macron and anti-EU far-right Marine Le Pen won the top two places in the first round of the election and went through to the second round.

As Macron has been perceived as the best chance of stopping Le Pen and her ‘Frexit’ plans, this bolstered Euro demand.

The Euro rose again this week following the final television debate between the two candidates. The aggressive debate ended with 63% of polled viewers finding Macron to be the ‘most convincing’ of the two.

This was thought to give a boost to Macron’s support. Opinion polls suggest Macron will win around 60% of the final vote on Sunday, while Le Pen will gain around 40%.

The Euro has also been bolstered by domestic data this week. Eurozone Gross Domestic Product (GDP) met expectations with a solid quarterly growth of 0.5%.

Eurozone retail data has beaten expectations this week too. Thursday’s March retail sales figures came in at 2.3% year-on-year, rising from 1.7% and beating the expected 2.1%. Friday’s Markit retail PMI for April followed by rising from 49.5 to 52.7.

The US Dollar has also seen stronger demand this week, but it’s been unable to hold its ground against a strengthening Euro.

This week’s Federal Reserve meeting saw the US central bank taking an upbeat stance, playing down the US’ underwhelming Q1 growth data and indicating that policymakers still intended on two more US interest rate hikes in 2017.

March’s US trade deficit data beat expectations, lightening from -$43.8b to -$43.7b rather than worsening to -$44.5b as forecast.

Market hopes for Trump’s planned fiscal policy and tax plans have also increased this week, as Trump’s controversial healthcare plan finally made it through the US House with some alterations. The bill still needs to be passed through the Senate before it can become law, however.

On Friday afternoon, EUR/USD investors will be preparing for the French Presidential election and reacting to the latest US Non-Farm Payroll data.

The Euro to US Dollar exchange rate could fall from its highs if investors choose to take a more cautious stance ahead of the French election, amid persistent fears that anti-EU Marine Le Pen could still win Sunday’s election and begin a ‘Frexit’.

Demand for the US Dollar is likely to be altered by Friday’s US Non-Farm Payroll results. If they beat expectations, the Euro to US Dollar exchange rate is even more likely to fall from its highs.

Of course, the results of Sunday’s French Presidential election will be the biggest focus for markets on Monday next week. The Euro to US Dollar exchange rate could surge on a Macron win, or see massive plummets if Le Pen pulls off a surprise win.

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