- Euro US Dollar Exchange Rate Touches 1.11 – Trends near highs for most of Wednesday
- Euro Bolstered by Hopes of Stronger Eurozone – US Dollar weakened by Trump jitters
- EUR Forecast: French Employment Data on Thursday – As well as ECB speeches
- USD Forecast: Markets Await Trump Developments – Jobless claims data also in focus
US stocks dropped when American markets opened on Wednesday afternoon, as did the US Dollar.
An increasing amount of investors have become anxious about the US political and economic outlook due to this week’s Trump news, particularly Tuesday night’s news that Trump had asked Comey to step back on the Michael Flynn investigation.
According to David Madden, market analyst from CMC markets;
‘The decline in the US Dollar has wiped out all the gains it has made since Donald Trump was elected. The speculation about his impeachment is rising and the dollar is falling in tandem.’
[Published 12:03 BST 17/05/2017]
The Euro has put in strong gains against the US Dollar so far this week as markets begin to view the Eurozone more optimistically and uncertainties begin to rise about the US economy under US President Donald Trump.
EUR USD began the week trending at the level of 1.0930 and has since gained around a cent. On Wednesday the pair held comfortably above the level of 1.10 and touched a high of 1.1117 for the first time since early November 2016 – before the US election.
Euro (EUR) Benefits from Hopes of Increased Eurozone Strength
It’s been a good week indeed for the Euro – and that’s even without the bloc’s solid economic data.
As Emmanuel Macron is inaugurated as France’s new President and spends his first few days bolstering his networking and talking up confidence in the Eurozone and European Union, markets are becoming more bullish on the shared currency.
Political risks in the Eurozone have all but faded since the French election ended with a market-positive result. Market concerns about Macron’s first days on the job have also been lightened.
He confidently picked centre-right Édouard Philippe as his prime minister, potentially bolstering Macron’s support among republicans in France.
Then, Macron met with German Chancellor Angela Merkel and seemingly effortlessly made a joint call with her to increase and strengthen Eurozone integration.
His ability to quickly and confidently get along with Merkel was a definite boost for Euro demand as it supported hopes for a stronger Eurozone.
This week’s Eurozone data has only helped to strengthen Euro sentiment. Tuesday saw the publication of the bloc’s second Q1 Gross Domestic Product (GDP) estimate, which met expectations of solid 0.5% quarterly growth.
The Eurozone’s inflation rate was also a firm 0.4% month-on-month and 1.9% year-on-year in April, as expected. The bloc’s March trade surplus and ZEW economic sentiment surveys beat expectations.
US Dollar (USD) Sold on Trump Jitters
Risk-sentiment just can’t seem to catch a break lately, as this week has seen a seemingly continuous flow of political uncertainties emerging from the US Trump administration.
On Tuesday, US President Donald Trump admitted that he shared classified intelligence information with Russian officials at a recent meeting.
A report from the New York Times then claimed that James Comey, who was recently sacked from his position as FBI Director by Trump, had mentioned in a memo that Trump had asked him to end an FBI investigation into Michael Flynn.
Flynn was under FBI inquiry after he misled White House staff on his connection with Russian diplomats. Some have suggested that Trump’s comments indicated he had attempted to influence or impede the FBI’s investigation.
Due to the increasing number of scandals this week, USD investors have been selling off the ‘Greenback’ in favour of assets perceived to have a more stable outlook.
Some analysts have pointed out that markets are even entertaining the possibility of an impeachment process for Trump. According to Naeem Aslam from Think Markets;
‘What investors are worried about is that the impeachment could take place over in the US as the odds are showing more than 50 percent for such an event after the New York Times released its article. If such scenario does become a reality, we could literally say good bye to Trump’s reflation trade.’
Euro US Dollar Forecast: USD Could Remain Weak
Unless the situation in the US calms down notably in the coming days, the Euro to US Dollar exchange rate is likely to sustain most of this week’s gains.
While some US data will be published before the end of the week, it is not likely to be influential enough to significantly improve the USD outlook. This data includes US jobless claims and Philadelphia Fed manufacturing figures due on Thursday.
The Euro’s strength this week is largely due to the Eurozone’s more stable political and economic outlook in recent weeks, so it’d take a lot for the shared currency to weaken before the end of the week too.
Thursday’s Eurozone data could influence the currency slightly. Unemployment stats from The Netherlands and France will be published and European Central Bank (ECB) officials including President Mario Draghi will be holding speeches throughout the day.
EUR/USD Interbank Rate
At the time of writing this article, the Euro US Dollar exchange rate trended in the region of 1.1100. The US Dollar to Euro exchange rate traded at around 0.9000.
