The Euro US Dollar (EUR USD) exchange rate began to trend higher overnight on Tuesday following the unexpected sacking of FBI Director James Comey.
Markets were shocked yesterday evening following the move by President Donald Trump to remove Comey from his position at the head of the FBI.
The White House announced that Comey had been ‘terminated and removed from office’ over his handling of the inquiry into Hillary Clinton’s email use, after it emerged that he gave inaccurate information about the emails in a meeting with Congress last week.
However a number of Democrats claimed that Mr Comey was removed due to the FBI investigation into alleged connections between Trump’s campaign and Russia, with some observers branding him a ‘tinpot dictator’ and making comparisons to the Watergate scandal that led to the resignation of President Nixon.
Whatever the reason, the move unsettled markets, allowing EUR USD to advance as traders saw the move as yet another sign of Trump’s unpredictability.
Investors also fear that the sudden firing of Comey could negatively impact the president’s relationship with Congress, hampering his ability to push through his long awaited economic reforms.
UBS analyst Paul Donovan said;
‘Ordinarily the dismissal would not matter to markets, but the move might be regarded as further evidence of presidential unpredictability (which markets dislike). It may impact relations with Congress, and relations with Russia; both have market relevance.’
The shock news also eased some of the pressure on the Euro as markets shifted their focus from the French elections, where despite claiming victory on Sunday President-elect Emmanuel Macron now faces an uphill battle to gain a majority in June’s parliamentary elections, where his party currently holds zero seats.
Meanwhile, the single currency was also strengthened this morning by the release of France’s latest Industrial Production figures.
According to Official stats from Insee, French factory output rocketed from -1.7% to 2.0% in March, reaching its best level this year and easily outpacing initial predictions that production would rise by 1.0%.
Analysts are hopeful that this uptrend will continue into the coming months as encouraging growth in the Eurozone suggests that demand will remain strong.
However the jump was not enough to bump up the sectors first quarter results, with France’s industry as a whole contracting by 0.5% in the first three months of 2017.
Looking ahead the EUR USD exchange rate is likely to slip again this afternoon following a speech from European Central Bank (ECB) President Mario Draghi, with analysts expecting him to maintain his dovish tone towards future monetary policy, despite the recent Eurozone PMI’s suggesting that the bloc has largely recovered from the debt crisis.
Meanwhile the US Dollar may recover this afternoon if Boston Federal Reserve President Eric Rosengren hints towards further rate hikes from the fed later this year, with recent comments that falling unemployment could overheat the economy hinting that he will seek a more hawkish approach from the Fed towards tightening monetary policy.
Current Interbank Exchange Rates
At the time of writing the EUR USD exchange rate was trending around 1.0869 and the USD EUR exchange rate was trending around 0.9203.