The Euro to Dollar Rate (EUR/USD) Climbs before Thursday?s ECB Meeting

September 4, 2017 - Written by Ben Hughes

STORY LINK The Euro to Dollar Rate (EUR/USD) Climbs before Thursday?s ECB Meeting

The Euro to Dollar exchange rate started this week on broadly solid footing, with markets still digesting last week’s disappointing run of US data releases and the escalating crisis with North Korea.

The ‘Greenback’ is somewhat bearish today, experiencing thin trading as a result of today being the US Labour Day Holiday. The Euro, on the other hand, has surged in demand, despite a notable jump in Spanish unemployment. This growth can primarily be attributed to the current situation regarding North Korea and the US Dollar’s inability to capitalise on the latest jump in safe-haven demand.

North Korea engaged in its 6th nuclear missile test over the weekend and is reportedly preparing for another intercontinental missile launch, news that has sent continued shockwaves throughout the markets, further pushing traders to move their money to perceivably safe-haven investments like the Swiss Franc (CHF) and the Japanese Yen (JPY).

The US response remains first and foremost diplomatic, with the US envoy to the UN desperately urging the Security Council to take ‘the strongest possible measures’ in regards to sanctions after this latest nuclear test.

It is also being reported that the US is considering threatening to stop trade with all countries that partake in trade with North Korea.

The US Dollar is traditionally considered a better safe-haven currency than the Euro, however last week’s run of disappointing data has left it floundering somewhat, with traders instead choosing to buy the Euro.

This may change, however in the build-up and aftermath of Thursday’s European Central Bank meeting.

Euro Gains with ECB Meeting on the horizon

Thursday will feature the September ECB policy meeting, an event that many are hoping that will feature the beginning of the tapering for the bank’s quantitative easing (QE) policy.

This has, however, come under question, as according to various Euro-area officials the ECB might be inclined to hold steady on its final QE plan until December this year, with ‘sheer complexity’ being cited as the primary reason.

Chief European Financial Economist at Jefferies asserted:

‘It makes a lot of sense for them to delay the definite decision until December. It will be interesting to see how the market takes this. As ever the market is impatient for news’.

The Euro US Dollar exchange rate has mostly remained unperturbed to this news, though this will very likely change in the build-up, and immediate aftermath of this event, especially if the situation with North Korea becomes increasingly hostile, driving investors even further towards safe-haven currencies.

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