EUR/USD Exchange Rate, UK Political Developments Weigh on Euro
The Euro US Dollar (EUR/USD) exchange rate held steady today, with the pairing currently trading around $1.114 with Brexit developments continuing to dominate European headlines as Boris Johnson’s new proposal faces a ‘Super Saturday’ showdown in the British Parliament.
However, with increasing doubts whether or not it will gain a voting majority, market confidence in the single currency is beginning to dwindle.
Meanwhile, German Chancellor Angela Merkel said that an extension to Article 50 would be unavoidable if Boris Johnson’s deal fails to pass through Parliament tomorrow. As a result, this has further buoyed hopes that a disorderly exit can be avoided on October 31.
The Euro has also benefited from hopes of a UK-EU deal on Saturday preventing an economic recession in the Eurozone.
Analysts at Reuters commented:
‘The common currency has been rattled this year by dismal manufacturing data, as well as by worries that deepening economic tensions between the United States and China could make Eurozone economies grow even slower… But with Britain’s Prime Minister Boris Johnson and EU leaders agreeing a new deal for Britain to exit the bloc, and with U.S.-China tensions easing, the Euro [could enjoy] a sigh of relief.’
USD/EUR Exchange Rate Steady on Fed Rate Cut Fears
The US Dollar (USD) has remained subdued today on heightened fears of a rate cut from the Federal Reserve next month. This follows yesterday’s release of September’s US industrial production figure, which eased below forecasts from 0.8% to -0.4%.
Yesterday also saw US housing starts fall from a 12-year high in September, with the figure shrinking from 1.386 million to 1.256 million.
Chris Rupkey, a Chief Economist at MUFG, commented:
‘It inches [the Fed] forward to taking out a little more insurance to help support the economy that continues to face the headwinds of reduced world trade from tariffs.’
Meanwhile, US Dollar investors will be looking ahead to today’s speech by Richard Clarida, the Vice Chairman of the Board of Governors at the Federal Reserve. Any dovish comments about the US economy, however, could weigh on the ‘Greenback’.
US-China trade developments will also remain in focus. However, any signs of conflict between the world’s two largest economies could weaken the US Dollar on fears that it could damage the increasingly fragile US economy.
EUR/USD Outlook: Brexit Breakthrough Could Boost Eurozone’s Ailing Economy
Euro investors will be looking ahead to next Monday’s release of Germany’s producer price index for September, which is expected to ease by -0.1%. As a result, we could see the single currency begin to fall against the ‘Greenback’ on heightened fears of a recession in the Eurozone.
US Dollar traders, meanwhile, will be looking to next Tuesday’s publication of September’s US existing home sales, which are expected to ease from 5.49 million to 5.45 million.
Brexit developments, however, will remain in focus for common currency traders, with any signs of a Parliamentary victory for Boris Johnson’s deal likely to boost confidence in the struggling Eurozone economy. Consequently, we could see the Euro begin to rise against the US Dollar.
