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US Dollar Euro (USD EUR) Tumbles Over Holidays on Poor Consumer Confidence

December 27, 2017 - Written by Tim Boyer

The US Dollar Euro (USD EUR) exchange rate tumbled over the holiday period as markets responded to a below-forecast US consumer confidence print.

US Dollar Euro (USD EUR) Falls on Notable Drop in Consumer Confidence

Consumer confidence in the US fell to 122.1 in December, down from the previous period’s 128.6 and below the consensus of 128.

This primarily resulted from a drop in the short-term outlook, with recent US tax reform measures seemingly not bolstering the consumer outlook above its already very high levels.

Lynn Franco, Director of Economic Indicators at the Conference Board shared his thoughts on the readings:

‘Consumer confidence retreated in December after reaching a 17-year high in November. The decline in confidence was fuelled by a somewhat less optimistic outlook for business and job prospects in the coming months. Consumers’ assessment of current conditions, however, improved moderately’.

It should also be noted, however, that despite the decline, consumers’ expectations continue to remain at historically high levels, with economic growth expected to continue throughout 2018.

Nonetheless, this news left the USD EUR exchange rate firmly in the Euro’s favour.

Euro (EUR) Suffers Christmas Crash and Catalonia Woes, Maintains Lead over USD

The Euro did experience some movement over the Christmas period; dropping dramatically on Christmas day over the course of just a few minutes.

Analysts have asserted, however, that this ‘Christmas crash’ was not the result of political, or market-based news, with algorithm based trading instead being blamed.

Hiroshi Yanagisawa, Chief Analyst at FX Prime shared his thoughts on the occurrence:

‘There was nothing of substance, probably some algo-related, machine-based happening amid an absence of bids in a holiday market’.

In other news, markets are once again apprehensive with the situation in Catalonia, with pro-independence parties coming out on-top in the recent flash election.

This effectively underlines the fact that calls for independence from the region aren’t going away anytime soon and the threat of Spain losing Barcelona (and a notable portion of Spanish GDP) is still on the cards.

This would then translate into further instability for the Eurozone.

Despite this concern the Euro continued to maintain its lead over the ‘Greenback’.

USD EUR Forecast: Fed Monetary Policy in 2018

The US Dollar may find some greater purchase in 2018 depending on statements from the new Federal Reserve Chairman Jerome Powell - due to replace Janet Yellen in February.

Powell is widely regarded as the ‘safe bet’ by markets for Yellen’s replacement, so he is unlikely to massively deviate from her monetary policy measures.

Nonetheless, if he employs any hawkish rhetoric in the coming policy statements then the ‘Greenback’ could claw back some losses, particularly with the European Central Bank (ECB) having already expressed dovish plans for 2018.
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