Trump’s Budget Plan Prompts EUR/USD to Strengthen
The Euro US Dollar (EUR/USD) exchange rate is climbing today, following the poor reaction to yesterday’s US budget proposals.
At the time of writing EUR/USD is up by around 0.3% today, with the pairing recouping around half of last week’s losses.
US Dollar (USD) Slides on US Budget Disappointment
The US Dollar found itself sliding against the Euro and the majority of its other peers on Tuesday morning following a lukewarm reception to Donald Trump’s budget proposals for 2019.
Trump outlined his plans for a $4.4 trillion spending spree over the coming year, which despite curbs to welfare spending, would likely see the US federal deficit climb to $1 trillion next year, should they be approved by Congress.
The Associated Press writes;
‘President Donald Trump’s budget for the upcoming fiscal year calls for steep cuts to America’s social safety net and mounting spending on the military.
That combination in the $4.4 trillion budget plan submitted Monday to Congress steps far back from Trump’s promises last year to balance the federal budget. If enacted, his plan would establish annual $1 trillion-plus deficits.’
On top of this markets were also disappointed by Trump’s spending plans to implement his ambitious infrastructure reforms as he authorises just $200bn to be spend over a 10-year period, none of which is earmarked for bridges, railways, roads and tunnels.
The President proposes that the rest of the funds would be provided by states and the private sector, with his critics branding the plan ‘a scam’.
Observers warn that the approval of Trump’s budget could cause US national debt to skyrocket to record highs.
Euro (EUR) Rises on Growth Expectations
At the same time the Euro is being driven upwards today as the rally in stock markets this week prompts investors to flock back to the single currency.
The Euro has surged this year on expectations that the Eurozone is set for another year of bumper growth.
This has prompted speculation that the European Central Bank (ECB) may be tempted to raise interest rates in the near future and is prompting many traders to take long positions on the currency.
EUR/USD Forecast: Euro Likely to be Lifted by Eurozone GDP Figures
Looking ahead, the EUR/USD exchange rate may continue to climb on Wednesday with the release of the Eurozone’s latest GDP reading, which is expected to confirm the initial estimate that the bloc expanded 0.6% in the fourth quarter.
However the Euro could still face some losses as economists forecast that tomorrow’s industrial production figures will reveal that Eurozone factory output slowed in December.
Meanwhile the US Dollar looks likely slide tomorrow as economists forecast that the latest US CPI figures will reveal that domestic inflation slid from 2.1% to 1.9% at the start of the year.