EUR USD Exchange Rate Advances as Trump Campaign Subpoenaed

November 17, 2017 - Written by John Cameron

STORY LINK EUR USD Exchange Rate Advances as Trump Campaign Subpoenaed

The Euro US Dollar (EUR USD) exchange rate climbed by nearly half a cent overnight on Thursday as investors reacted to reports that Trump’s campaign had been subpoenaed last month.

US Dollar (USD) Pressured by Subpoena Report

The US Dollar came under considerable pressure overnight on Thursday as the Wall Street Journal reported that US special counsel, Robert Mueller has subpoenaed members of Donald Trump’s presidential election campaign as part of the ongoing investigation into alleged Russian interference in last year’s election.

The subpoenas resulted in a sharp sell-off of the US Dollar as investors fear that this is further signs of possible conclusion between Trump’s campaign and the Russian State.

The report was all the more damaging for the ‘Greenback’ yesterday as it detracted attention away from the passing of the US House of Representatives tax bill, which aims at cutting corporate tax from 35% to 20%, seen as a positive step towards the implementation of Trump’s long awaited tax reforms.

Viraj Patel, FX strategist at ING said;

‘The spotlight has been stolen by reports that the US special counsel, Robert Mueller, has issued subpoenas to President Trump’s campaign officials in relation to [the] 2016 election investigation.’

‘Add to this further noise surrounding US-North Korea diplomacy and it’s difficult to see anything but the US dollar losing out in an environment where policy and political uncertainty remains elevated. Global markets haven’t batted an eyelid to the House Republicans passing their version of the Tax Cuts and Jobs Act.’

Investors fear that the latest developments will further frustrate efforts by Trump’s administration to focus on its tax reforms and other policy plans, with the President and his team likely to be forced into defence yet again as it attempts to weather another scandal.

Euro (EUR) Gains Tempered by Draghi Speech

Meanwhile the Euro has found itself pulling back from the high struck earlier this morning in the wake of a speech by European Central Bank (ECB) President, Mario Draghi in at the European Banking Congress in Frankfurt.

While Draghi praised the recent growth seen in the Eurozone, suggesting that growth remains robust and that its upward momentum was likely to continue, he reaffirmed the ECB’s commitment to its accommodative monetary policy as he suggested that higher levels of inflation were still reliant upon stimulus from the central bank.

Draghi said in his speech this morning;

‘We are not yet at a point where the recovery of inflation can be self-sustained without our accommodative policy. A key motor of the recovery remains the very favourable financing conditions facing firms and households, which are in turn heavily contingent on our policy measures.’

‘An ample degree of monetary stimulus remains necessary for underlying inflation pressures to build up and support headline inflation over the medium term.’

The ECB announced last month that it would reduce its bond buying programme from €60bn to €30bn at the start of next year, however is also chose to extend the programme until at least September, while also signalling it would be open to extending it further if it felt it was necessary.

EUR USD Exchange Rate Forecast: Eurozone PMI Data to Show Further Growth?

Looking ahead to next week the EUR USD exchange rate may continue to push higher in the second half of the session as the Eurozone publishes its latest PMI figures, with economists forecasting that most sectors of the bloc’s economy will have continued to show robust growth in November.

Meanwhile movement in the US Dollar may be hampered next week if investors continue to remain wary by recent political developments in Washington.

Current Interbank Exchange Rates

At the time of writing the EUR USD exchange rate was trending around 1.1803 and the USD EUR exchange rate was trending around 0.8474.

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TAGS: Euro Forecasts