EUR/USD News and Forecast: Euro to US Dollar Exchange Rate Rises on ECB Interest Rate Talk

Hawkish Central Bank Comments Send EUR/USD Exchange Rate Higher

The Euro to US Dollar (EUR/USD) exchange rate strengthened overnight on Tuesday as investors welcomed some hawkish comments from central bankers in Europe.

Euro (EUR) Exchange Rates Lifted by Hawkish Comments from ECB Members

Euro (EUR) exchange rates were sent climbing on Tuesday following comments from European Central Bank (ECB) member, Jozef Makuch.

Slovakia’s representative on the ECB’s Governing Council struck an unusually hawkish tone as he discussed how the bank’s monetary policy may look following the end of its stimulus programme.

Makuch suggested that the ECB would need to shift towards raising interest rates as the Eurozone’s stellar growth in 2017 begins to reduce the need for aggressive stimulus from the bank.

Speaking in Bratislava Makuch said;

‘Discussions are more and more shifting from asset purchases to possible future use of interest rates to regulate the economy.’

Echoing Makuch’s calls for the use of interest rates to keep Europe’s recovery in check were remarks from Estonia’s central bank governor and representative to the ECB, Ardo Hansson who said;

‘Moving to a communication which draws attention to the multi-faceted elements of monetary policy including interest rates is probably something that we should consider over the coming months.’

US Dollar (USD) Sturdy as US Senate Passes Tax Reform

The US Dollar looks set to make a comeback during Wednesday’s session following the passing of Trump’s long awaited tax reforms.

Republicans claim that the first major US tax reform in decades will help to promote growth in the US economy by slashing corporate tax and lowering income tax for various tax brackets.

Many observers are a little more sceptical however, with critics saying that the cuts will only benefit the ultra-rich, and cause the national deficit to balloon even further.

Despite this, the passing of the Republican’s tax bill is still likely to strengthen the US Dollar as it leads to US yields being bolstered.

The US House of Representatives is expected to hold a final vote on the bill later today, after which Trump will be able to sign the bill into law, which is likely to take place before the week is out.

EUR USD Exchange Rate Forecast: Uptick in Consumer Confidence to Bolster the Euro?

Looking ahead, the EUR USD exchange rate may continue to tick higher on Thursday with the publication of the Eurozone’s latest Consumer Confidence data.

Economists forecast that the bloc’s sentiment index will have climbed from 0.1 to 0.2 in December, only the second positive reading in the past 17 years.

Meanwhile, the US Dollar may mount a recovery later this afternoon as the US releases its latest housing data, with analysts predicting that existing homes sales will have ticked higher in November.

John Cameron

John studied economics at Cambridge University and later became an MSTA qualified Technical Analyst. He began working for TorFX almost a decade ago and now holds a Senior Account Manager position. As well as lending his clients support and guidance, John has produced market commentary and detailed exchange rate analysis for a number of online publications.

Contact John Cameron