The Euro US Dollar (EUR USD) exchange rate struck a six-week high on Thursday as markets reacted positively to Geert Wilders defeat in the Dutch Elections.
Markets concerns were allayed yesterday by the announcement that Dutch Prime Minister Mark Rutte and His liberal VVD party had seen off a challenge from far-right candidate Wilders and his Eurosceptic Freedom Party.
Observers viewed the Dutch elections as the first real test of a nationalist party in the Eurozone after many populist parties saw support rise considerably over the last year.
Analysts believe that Wilders’ defeat in the Netherlands is an indicator that populism is not such a dire threat to the stability of the Eurozone as some had initially suggested.
The Independent’s Denis MacShane wrote;
‘The Dutch result and the probable new President of France signals an end to Brexit-Trump nationalist populism with its nasty anti-immigrant scapegoating. Such politics will not disappear and it will infect mainstream parties, much as UKIP has now transplanted itself into the Conservative Party.’
Rutte now faces the challenge of forming a new coalition government as he will have to negotiate with at least three other parties as at 33 seats his party is well short of the 75 required to form the new government.
EUR investors are also likely to remain relativity cautious ahead of the French election as not to be blindsided by Marine Le Pen after a similar dismissal of Brexit and Trump last year.
Meanwhile the US Dollar remained on the back foot on Thursday following the Federal Reserve meeting on Wednesday.
Despite the Federal Open Market Committee (FOMC) voting in line with market expectations and raising US interest rates from 0.75% to 1.0%, the hike had been forecast for weeks ahead of time and with most investors having already priced it in, the hike had little positive impact on the USD exchange rate.
Markets were also disappointed by Janet Yellen’s following statement on Wednesday evening as many analysts had expected that the early start to monetary tightening this year would prompt the Fed Chair to announce that the bank would revise the number of rate hikes up from three in 2017.
The unexpectedly dovish tone continued to weigh on the US Dollar on Thursday despite an uptick in US housing data.
US Housing Starts leapt from -1.9% to 3.0% in February its highest levels since October and easily surpassing initial estimates that would rise to 1.4%.
The jump has been attributed to the un-seasonably warm climate at the start of the year which saw the number of new single family house constructed last month soar and reach a new nine-year high.
The rise in activity was also prompted by a strong labour market as US unemployment tumbled over the same period, increasing the number of potential homeowners.
Looking ahead the Euro may relinquish some of its gains later this morning with the release of the Eurozone’s latest trade figures, with the bloc’s trade surplus expected to have narrowed at the start of the year following a slowdown in exports from the EU’s latest economy, Germany.
Meanwhile the US Dollar may rally following the plenary reading of the Michigan Consumer Sentiment Index, with sentiment expected to climb from 96.3 to 97.0 in March after Trump pledged to spend $1 trillion on new infrastructure projects over his first term as President.
Current Interbank Exchange Rates
At the time of writing the EUR USD exchange rate was trending around 1.07 and the USD EUR exchange rate was trending around 0.93.