EUR/USD Exchange Rate Fluctuates as Trump Calls for ?Strong? Dollar

Modified: Friday, 26 January 2018 10:35 BST - Written by John Cameron

STORY LINK EUR/USD Exchange Rate Fluctuates as Trump Calls for ?Strong? Dollar

The Euro US Dollar (EUR USD) exchange rate has traded in a wide range over the last 24 hours as markets reacted to comments from President Trump.

US Dollar (USD) Fluctuates as Trump Comments Contradict Mnuchin

After falling to a three-year low against the Euro yesterday afternoon the US Dollar rebounded in overnight trade following remarks from President Trump in Davos.

Part of the US Dollar’s weakness yesterday was driven by remarks from Treasury Secretary Steven Mnuchin, who suggested that the US ‘welcomed’ a weaker Dollar as he spoke at the World Economic Forum in Davos.

However it appears that Mnuchin may have been speaking out of turn as Trump contradicted him yesterday as he called for a ‘strong’ US Dollar.

In an interview with CNBC Trump said;

‘The dollar is going to get stronger and stronger, and ultimately I want to see a strong dollar. Our country is becoming so economically strong again and strong in other ways, too.’

His comments had an immediate effect on the EUR/USD exchange rate, with the US Dollar recouping the majority of the day’s losses towards the end of Thursday’s session.


However it appears that Trump’s remarks provided only limited relief for the US Dollar as it began to trend lower again this morning.

Some of the renewed weakness in USD is likely due to reports suggesting that Trump attempted to fire Robert Muller from his position as special counsel in June.

Muller is currently head of an investigation into alleged Russian interference in the 2016 presidential election, something that some observers took as an attempt to hinder the investigation.

While the firing ultimately prevented by White House counsel Donald McGahn’s threats to resign, it has done little to alievate some of the political uncertainty that hangs over Washington.

Further weakness in USD is also likely to be partly driven by concerns over what President Trump will talk about when he makes his speech in Davos later today.

Markets fear that Trump will remain committed to his ‘America first’ policy in his speech, with calls for deglobalisation unlikely to be welcomed by investors.

ECB Inflation Expectations Continue to Lift Euro (EUR)

The Euro meanwhile has been quick to take advantage of the US Dollar’s renewed weakness this morning as it remains buoyed by yesterday’s European Central Bank (ECB) meeting.

This comes as ECB President, Mario Draghi appeared confident that inflation in the Eurozone will continue to trend high as it is supported by solid growth across the block.

The ECB’s inflation optimism was also echoed by the bank’s Survey of Professional Forecasters of Friday as analysts predict that inflation could accelerate in the coming years.

The survey suggests that headline inflation would likely strike 1.5% before rising to 1.7% in 2019.

However Draghi did warn that the recent surge in the Euro could undermine the ECB’s efforts to raise inflation, something that likely prevent interest rates from being raised this year.

In a press conference following the ECB’s policy meeting on Thursday Draghi said;

‘Recent volatility in the exchange rate represents a source of uncertainty which requires monitoring with regard to its possible implications for the medium-term outlook for price stability.’

‘Based on today’s data I can see very few chances that interest rates could be raised at all this year.’

EUR/USD Exchange Rate Forecast: US GDP

Looking ahead the EUR/USD exchange rate may rally even higher this afternoon as the US publishes its latest GDP figures.

Economists forecast that the figures will show that US economic growth slowed slightly from 3.2% to 3% in the four-quarter, likely weighing on the US Dollar.

Meanwhile EUR investors are likely to turn their attention to next week’s release of the Eurozone’s own GDP figures, with an expected uptick in growth likely to bolster the Euro.

International Money Transfer? Ask our resident FX expert a money transfer question or try John's new, free, no-obligation personal service! ,where he helps every step of the way, ensuring you get the best exchange rates on your currency requirements.

TAGS: Euro Forecasts