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EUR USD Exchange Rate Strengthens as German Exports Boom

October 10, 2017 - Written by John Cameron

The Euro US Dollar (EUR USD) exchange rate continued to trend higher this morning as Germany’s latest trade figures impressed investors.

Euro (EUR) Strengthened by German Trade Figures

The Euro extended its gains further this morning as Germany posted some impressive trade figures in August.

According to data released by Destatis Germany’s trade surplus rose slightly from €19.6bn to €20bn in August.

While the balance itself was not overly impressive on its own it was Germany’s export data that saw the single currency push higher as seasonally adjusted exports increased 3.1% from July, easily beating expectations of a 1% rise and reaching a one-year high.

Making it all the more impressive is that the jump in exports comes despite a strong Euro, something that would usually make Germany goods less attractive to foreign buyers.

Carsten Brzeski, an ING economist said;

‘While financial markets and the [European Central Bank] have been discussing the risks of a stronger euro, the country which often claims to be export world champion is still enjoying a strong export recovery. Despite the summer lull, the year 2017 should be the best year for German exports since 2010.’

‘Looking ahead, the biggest risks for the German economy and the export sector come from the outside. Geopolitical risks, a slowdown of the US or UK economy and a deflating euphoria could dent the strong growth momentum. However, for the time being, the German economy is enjoying the best of all worlds: strong domestic demand and surging exports.’

US Dollar (USD) Weakened by North Korea Concerns

Meanwhile the US Dollar fell sharply overnight on Monday as investors feared that geopolitical tensions could flare once again.

These fears were largely driven by concerns around North Korea as the secretive country celebrates the founding of its ruling party this week, with Pyongyang frequently marking such occasions with missile launches or nuclear tests, with many analysts speculating last week that North Korea was gearing up to conduct a long-range missile test.

Adding to these concerns were recent comments from US President Donald Trump over the weekend as he alluded towards taking military action against Pyongyang, as he suggested on twitter that after years of ‘making fools of U.S. negotiators’ that ‘only one thing will work’ against the North Korea leadership.

Doubling down on this on Monday Trump said;

‘Our country has been unsuccessfully dealing with North Korea for 25 years, giving billions of dollars & getting nothing. Policy didn’t work!’

Markets fear that such comments could escalate tensions between the US and North Korea even further, something that could negatively impact US relations with Pyongyang’s allies in Beijing.

EUR USD Exchange Rate Forecast: FOMC Minutes to Strengthen December Rate Hike Odds?

Looking ahead the EUR USD exchange rate may begin to retreat on Wednesday afternoon with the release of the minutes from the most recent Federal Reserve policy meeting as investors look for any further clues that the Federal Open Market Committee (FOMC) is moving towards anther rate hike by the end of the year.

While CME Group’s FedWatch tool already places odds of a December rate hike at over 85% markets will be hoping that the minutes will confirm market speculation, although conversely the US Dollar could retreat even further if the minutes are a little more dovish than expected.

Meanwhile EUR investors are likely to be focused on a number of speech by a number of European Central Bank (ECB) members later this week, with markets hoping to hear about the bank’s plans for ending its quantitative easing programme, with any suggestion that tapering could start early next year likely to drive the Euro higher.

Current Interbank Exchange Rates

At the time of writing the EUR USD exchange rate was trending around 1.1788 and the USD EUR exchange rate was trending around 0.8480.
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