The Euro (EUR) has dropped by -1% against the US Dollar (USD) today, in addition to making moderate losses against other currency peers.
This poor performance is down to the ongoing Turkish economic crisis, which has seen the Lira nosedive in value.
Because a number of Eurozone banks have invested in Turkey, this development has led to concerns that these banks could suffer from the ongoing crisis.
(Last updated 10th August, 2018)
Uninspiring ECB Update Leaves Unfavourable EUR/USD Trading
The Euro (EUR) has made a minor loss against the US Dollar (USD) today, in addition to trading in a narrow range against most of its other currency peers.
This generally disappointing movement is down to a lack of support from today’s European Central Bank (ECB) bulletin.
The ECB bulletin has given a ‘business as usual’ forecast for future Eurozone development, with policymakers stating that:
‘The Euro area economy is proceeding along a solid and broad-based growth path.
‘Uncertainties related to global factors, notably the threat of protectionism, remain prominent, and the risk of persistent heightened financial market volatility continues to warrant monitoring.
‘However, the risks surrounding the Euro area growth outlook can still be assessed as broadly balanced.
‘The underlying strength of the economy has confirmed the Governing Council’s confidence that the sustained convergence of inflation to its aim will continue in the period ahead and will be maintained even after a gradual winding-down of the net asset purchases.’
US Dollar to Euro (USD/EUR) Exchange Rate Rises as Fed’s Barkin Backs Interest Rate Hike
On the other side of the pairing, the US Dollar (USD) has advanced against the Euro (EUR) today thanks to Federal Reserve remarks made yesterday.
Fed Bank of Richmond President Thomas Barkin has raised hoped for another US near-term interest rate hike by stating that the economy can handle higher rates.
Speaking on Wednesday, Mr Barkin said:
‘It is difficult to argue that lower-than-normal [interest] rates are appropriate when unemployment is low and inflation is effectively at the Feds target.’
Euro to US Dollar Exchange Rate Forecast: Are EUR/USD Losses ahead on US Inflation Rate Data?
The Euro’s (EUR) recent losses against the US Dollar (USD) could extend in the near-future, when US inflation rate data comes out on Friday.
While the core US inflation reading isn’t expected to change from 2.3%, base annual inflation is tipped to rise from 2.9% to 3%.
An additional month-on-month rise from 0.1% to 0.2% has also been forecast; a pair of higher readings could raise hopes for a near-term Fed interest rate hike.
The US central bank, the Federal Reserve, has raised interest rates twice in 2018 and USD traders are hoping for two more before the end of the year.
A faster pace of price growth will put more pressure on Fed policymakers to consider higher interest rates, which is why the US Dollar could rise on the news.
Looking beyond to next week, the first notable Eurozone data releases will come on Tuesday, covering German and Eurozone-wide GDP growth rate readings.
There could be EUR/USD exchange rate volatility on the news, as expectations are for a faster pace of German growth but an overall Eurozone economic slowdown.
Germany has the single largest economy in the Eurozone, so it is possible that the EUR/USD exchange rate will still rise on Tuesday despite a Eurozone slowdown.
