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Euro to US Dollar Exchange Rate Surges to New 2017 High on Draghi Comments
Published: 27 Jun at 4 PM Tags: Euro Exchange Rate, Dollar Exchange Rate, Currency Exchange, Forex, Euro Crisis, UK, Exchange Rates, Economy, Inflation, Spain,
The Euro to US Dollar exchange rate saw a surge in demand on Tuesday, as investors bought the shared currency up in reaction to the latest comments from European Central Bank (ECB) President Mario Draghi. EUR/USD gains were limited by impressive US consumer confidence however.
EUR/USD began this week trading at the level of 1.1190. After trending flatly at the beginning of the week, the pair surged to a fresh 2017 high of 1.1297 on Tuesday. This was the pair’s best level since August 2016.
Investors were surprised by unexpectedly hawkish comments from ECB President Draghi during an ECB Forum in Portugal.
As always, Draghi argued that the ECB’s stimulus measures were still needed to support the Eurozone’s economic recovery. He stated that recovery was becoming stronger and broader and that the bloc had grown for 16 consecutive quarters.
The main takeaway for investors however, were his shift in tone and his comments that ‘policy needs to be persistent and we need to be prudent in how we adjust its parameters’.
His indication towards adjusting policy indicated to investors that the ECB may be discussing slightly reining in its aggressive stimulus package sooner than markets had expected.
This led to a surge in ECB tightening bets, as well as demand for the Euro. Investors are now even more focused on upcoming Eurozone inflation data, as worse-than-expected inflation stats could reverse this recent hawkishness.
EUR/USD slipped from its best levels during the American session as the latest US consumer confidence report impressed traders.
CB’s June consumer confidence survey was predicted to slip to 116, but instead climbed to 118.9 – close to a 16-year-high.
The day’s other US data also beat expectations, as Richmond Fed’s June manufacturing index unexpectedly jumped from 1 to 7.
However, investors hesitated to buy into the US Dollar as the International Monetary Fund (IMF) downgraded its US growth forecasts, from 2.3% to 2.1% in 2017 and from 2.5% to 2.1% in 2018.
Towards the end of the week, EUR/USD investors will be largely focused on Eurozone inflation, though any indications of US inflation could also have a big impact on EUR/USD trade.
Wednesday will see the publication of Italy’s preliminary June inflation stats, followed by Spain and Germany on Thursday and lastly the Eurozone’s overall inflation projection on Friday.
As investors took Draghi’s comments to heart about deflation being replaced with reflation, any unexpected slowing in Eurozone inflation would be highly disappointing to markets. This would lead to EUR/USD shedding most of Tuesday’s gains later in the week.
As for the US Dollar, investors may get a better indication on the health of the US economy following Thursday’s final Q1 Gross Domestic Product (GDP) report and Friday’s final June Michigan University surveys.
Of particular interest will be Michigan’s inflation expectations print. If this beats expectations, Fed rate hike bets would improve and EUR/USD would weaken.
EUR/USD began this week trading at the level of 1.1190. After trending flatly at the beginning of the week, the pair surged to a fresh 2017 high of 1.1297 on Tuesday. This was the pair’s best level since August 2016.
Investors were surprised by unexpectedly hawkish comments from ECB President Draghi during an ECB Forum in Portugal.
As always, Draghi argued that the ECB’s stimulus measures were still needed to support the Eurozone’s economic recovery. He stated that recovery was becoming stronger and broader and that the bloc had grown for 16 consecutive quarters.
The main takeaway for investors however, were his shift in tone and his comments that ‘policy needs to be persistent and we need to be prudent in how we adjust its parameters’.
His indication towards adjusting policy indicated to investors that the ECB may be discussing slightly reining in its aggressive stimulus package sooner than markets had expected.
This led to a surge in ECB tightening bets, as well as demand for the Euro. Investors are now even more focused on upcoming Eurozone inflation data, as worse-than-expected inflation stats could reverse this recent hawkishness.
EUR/USD slipped from its best levels during the American session as the latest US consumer confidence report impressed traders.
CB’s June consumer confidence survey was predicted to slip to 116, but instead climbed to 118.9 – close to a 16-year-high.
The day’s other US data also beat expectations, as Richmond Fed’s June manufacturing index unexpectedly jumped from 1 to 7.
However, investors hesitated to buy into the US Dollar as the International Monetary Fund (IMF) downgraded its US growth forecasts, from 2.3% to 2.1% in 2017 and from 2.5% to 2.1% in 2018.
Towards the end of the week, EUR/USD investors will be largely focused on Eurozone inflation, though any indications of US inflation could also have a big impact on EUR/USD trade.
Wednesday will see the publication of Italy’s preliminary June inflation stats, followed by Spain and Germany on Thursday and lastly the Eurozone’s overall inflation projection on Friday.
As investors took Draghi’s comments to heart about deflation being replaced with reflation, any unexpected slowing in Eurozone inflation would be highly disappointing to markets. This would lead to EUR/USD shedding most of Tuesday’s gains later in the week.
As for the US Dollar, investors may get a better indication on the health of the US economy following Thursday’s final Q1 Gross Domestic Product (GDP) report and Friday’s final June Michigan University surveys.
Of particular interest will be Michigan’s inflation expectations print. If this beats expectations, Fed rate hike bets would improve and EUR/USD would weaken.
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Source: moneytransfer.co.uk