Euro to US Dollar Exchange Rate Slides as Market Dials Back Dovish Fed Expectations
After edging higher on Federal Reserve interest rate cut bets at the beginning of the week, the Euro to US Dollar (EUR/USD) exchange rate has slipped since yesterday on fresh comments from Central Bank officials in the US.
EUR/USD opened this week at the level of 1.1390 and briefly advanced to touch a three-month-high of 1.1409 on Tuesday. Since then though the pair has slipped again and at the time of writing was trending closer to the level of 1.1365.
Still, despite this slide it was only a fairly modest loss overall. EUR/USD remains well above last week’s opening level of 1.1225.
Investors have been selling the Euro to US Dollar exchange rate as Fed rate cut bets are tempered slightly. However, the pair’s losses have been limited as Fed rate cut bets remain high overall.
Euro (EUR) Exchange Rates Slip on Mixed Data and ECB Speculation
The Euro (EUR) remains one of the markets sturdier major currencies this week, but the shared currency’s appeal has been slightly limited by the confidence data published in the last few sessions.
German business confidence was mixed on Monday and French business confidence fell short of forecasts yesterday.
Today’s most notable Eurozone ecostats included German and French consumer confidence, which were also mixed.
German consumer confidence from July slipped to a lower than expected 9.8, while France’s June consumer confidence figure unexpectedly rose from 99 to 101 rather than to the forecast figure of 100.
Euro investors are hesitant to make big moves on the currency as this data has made little notable impact on European Central Bank (ECB) bets.
Investors still expect dovish monetary policy from the bank following last week’s comments from ECB President Draghi, but as Draghi’s outlook was not a big surprise the Euro’s losses have been largely priced in already.
US Dollar (USD) Exchange Rate Rebounds Slightly as Fed Dials Down Dovishness
Expectations for deep and aggressive US monetary policy easing from the Federal Reserve has caused major losses for the US Dollar (USD) in recent weeks, but fresh comments suggest these expectations may have been overdone.
During Tuesday’s American session, Fed President Jerome Powell expressed confidence in the Federal Reserve’s political independence.
It followed speculation from investors that the Fed would cut US interest rates significantly due to frustration from US President Donald Trump, who has pushed for big cuts.
Powell’s focus on the bank’s independence was taken as a signal that the bank would not necessary be aggressive in its easing despite Trump’s criticisms, and this helped the US Dollar to rebound slightly.
On top of this, St. Louis Fed President James Bullard indicated that a 50 basis point rate cut in July would be overdone, and this doused bets for a deep rate cut next month.
Euro to US Dollar (EUR/USD) Exchange Rate Investors Anticipate Major Data
While Euro to US Dollar (EUR/USD) exchange rate movement has been limited this week so far, the pair could be in for sharper movements in the second half of the week as more influential Eurozone and US data is due for publication.
This afternoon will see the publication of May’s US durable goods orders results.
It will be followed tomorrow by even more influential data, including Eurozone confidence results, German inflation, and US growth rate stats.
The US growth rate report has the potential to be the most influential dataset of the week for EUR/USD, though Friday’s Eurozone inflation rate stats may prove highly influential as well.
With Central Bank bets in focus, weak US growth data could lead to higher Federal Reserve rate cut bets and a weaker US Dollar, while weaker Eurozone inflation data would lead to higher European Central Bank (ECB) interest rate cut bets and a weaker Euro.
Of course, any surprising upcoming comments from Central Bank officials could also cause some movement in the Euro to US Dollar (EUR/USD) exchange rate.
