- Euro Looks to Reverse Decline– Positive data helps slow losses.
- More Deutsche Bank Woes– Data shows German bank faces higher borrowing costs than European peers.
- USD Gains on Rate Hike Predictions– Investors bet on a December increase in interest rates.
- US Election to add to Volatility – Wildcard Trump not out of the running yet.
The EUR USD exchange rate has continued its dramatic slide this week, sitting nearly two cents down on Monday’s opening levels. However, the Euro currently appears to be holding against any further losses.
Euro (EUR) Rates Steady Following Strong ZEW Survey for Eurozone
Yesterday’s better than expected data from the both German and Eurozone ZEW surveys have helped the Euro to slow its decline against the US Dollar (EUR USD) after the exchange rate hit a new two-month low.
Both the German and the Eurozone economic sentiment survey showed significant growth in October as they rose to 6.2 and 12.3 respectively. The Eurozone data was particularly positive as it showed the third consecutive month of growth following a drop to -14.7 immediately after the UK voted to leave the European Union.
EUR Forecast: Worries Over Deutsche Bank May Renew Pressure on the Euro
However, the EUR USD exchange rate could resume it’s downtrend in the near future.
Confidence in Deutsche Bank remains low as it becomes the only major European bank that has to pay to borrow funds , having to pay 0.06% interest on a one year loan.
It even faces higher borrowing costs than its counterparts in Italy and Greece, with Italy’s Monte dei Paschi borrowing at a rate of -0.06% and the National Bank of Greece borrowing at -0.04% for a one year loan.
This will not help the Euro, which has been hampered in recent weeks over worries about Deutsche Bank’s ability to pay a $14billion fine from the US Department of Justice.
US Dollar (USD) Bolstered by Fed Rate Hike Forecast
Meanwhile the US Dollar continues to strengthen as investors bet on a December rate hike from the Federal Reserve.
Following the decision in September to hold interest rates at 1.5%, Fed Chairwoman Janet Yellen indicated that a hike would be possible later in the year if the US economy continued growing. With recent US data being largely positive traders are increasingly betting that the rate increase will come in December, providing a huge boost to the ‘Greenback’.
EUR USD Exchange Rate Likely to be Volatile ahead of the US Elections
The other big factor dictating movement in the EUR USD exchange rate is the ongoing US presidential elections with polls currently favouring Democratic candidate Hilary Clinton following the emergence of a video last week which showed Republican candidate Donald Trump making lewd comments about women.
However as they say, it’s not over until the fat lady sings and markets are likely to remain volatile on the slight chance of a Trump victory in the last few weeks before polls open.
Current Interbank Exchange Rates
At the time of writing the EUR/USD exchange rate was trending around 1.10 and the USD/EUR exchange rate was trending around 0.90.
