Concerns about Next US-North Korea Clash Pushes EUR/USD Exchange Rate Higher

September 22, 2017 - Written by Frank Davies

STORY LINK Concerns about Next US-North Korea Clash Pushes EUR/USD Exchange Rate Higher

On Thursday’s trading session, the Euro steadily gained on the US Dollar. It initially opened at 1.1867 and closed at a higher rate of 1.1941.

Euro Boosted by Forecast-Beating Economic Activity

On the home front, the Euro has been supported against the US Dollar by initial PMI figures for September.

On the month, Eurozone, French and German activity measures all showed growth against expectations. This was especially good news with regard to the German data, as Germany’s economy is the largest in the Eurozone.

Summarising the higher level of German activity was Phil Smith, IHS Markit Principal Economist. Smith observed that;

‘September’s PMI survey showed Germany’s private sector economy in rude health, highlighting strong broad-based growth in both business activity and employment.

The powerhouse manufacturing sector again put in the stronger performance, though services also perked up in September to elevate the overall pace of expansion to the best seen since early-2011.

IHS Markit’s forecast of 0.7% GDP growth in the third quarter, therefore, remains well within the realms of possibility’.

In other news, European Central Bank (ECB) President Mario Draghi stressed that youth unemployment was still an issue. Draghi looked at the effects of the late 2000’s financial crisis, stating;

‘We have seen how in several countries the weight of the crisis has fallen disproportionately on the young people, leaving a legacy of failed hopes, anger and ultimately mistrust in the values of our society and in the identity of our democracy’.

US Dollar Loses Ground as North Korean Situation Heats Up

Proving that fighting fire with fire burns both sides, the US Dollar has fallen today due to the continually escalating tensions between the US and North Korea.

Following Donald Trump’s United Nations speech that suggested destroying North Korea if it made direct threats, NK leader Kim Jong-un retorted that;

‘I will surely and definitely tame the mentally deranged US dotard with fire’.

Musing on what the next North Korean action could be was Ri Yong-ho, Minister of Foreign Affairs. Doing little to calm the situation, Yong-ho said that;

’We have no idea about what actions could be taken as it will be ordered by leader Kim Jong-un. It could be the most powerful detonation of an H-bomb in the Pacific.’

Needless to say, across the Sea of Japan there have been voiced concerns about any possible detonation.

Speaking about the possible outcome of NK nuclear action in the Pacific has been Vipin Narang, a nuclear expert at the Massachusetts Institute of Technology. Narang has stated that;

‘If the test doesn’t go according to plan, you could [put the] population at risk. We are talking about putting a live nuclear warhead on a missile that has been tested only a handful of times. It is truly terrifying if something goes wrong’.

Trump has recently responded, showing no signs of letting up in this war of words. The President has said;

‘Kim Jong Un of North Korea, who is obviously a madman who doesn't mind starving or killing his people, will be tested like never before!’.

EUR USD Forecast: Last-Minute USD Advance Possible on US PMI Stats

The next source of Euro movement will be Germany’s Federal Election, which is taking place on Sunday.

The latest polls show that while the currently ruling CDU are likely to take the most votes, they may not have enough for a majority.

The CDU is headed by Germany’s longstanding Chancellor Angela Merkel and a victory for them could lead to the Euro appreciating.

If the CDU has to form a second coalition with their ideological opposites, the SPD, the Euro may decline slightly due to the complications that this type of government entails.

The last notable US announcements of the week will come shortly, consisting of PMI stats for September.

Unfortunately for the US Dollar, the services and overall composite PMIs are both predicted to decline - this will represent a slowdown in the US economy.

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TAGS: Euro Forecasts