Euro US Dollar Exchange Rate Forecast: EUR/USD to Rally Amid Political Uncertainty in Washington?

EUR/USD Exchange Rate Edges Higher on Concerns over Turmoil in the White House

The Euro to US Dollar (EUR/USD) exchange rate is making tentative gains this morning as reports of another shake up in the White House bolster the pairing.

At the time of writing EUR/USD is showing signs of pushing higher, but has faced some setbacks following the release of the Eurozone’s latest CPI report.

US Dollar (USD) Weakened by Reports of More Personnel changes in the White House

The US Dollar has found itself on the back foot against the Euro and the majority of its other peers this morning, in the wake of reports that Trump will make further changes to his inner circle.

The Washington Post published a report on Thursday that Trump is planning to sack his national security adviser Herbert ‘H.R.’ McMaster.

This comes after it emerged that McMaster sided with Trump’s former economic adviser Gary Cohn in warning Trump against implementing steel and aluminium tariffs.

The report comes just days after Trump fired Secretary of State Rex Tillerson via Twitter, a move that already had markets wary of US policy becoming increasingly protectionist.

Daisuke Karakama, chief market economist at Mizuho Bank in Tokyo said:

‘The best explanation for the impact the ongoing personnel changes taking place in the White House is that the dollar stands to weaken as it gets easier for President Trump to pursue protectionist policies.’

Euro (EUR) Pressured as Inflation Falls Faster than Expected

At the same time the Euro’s attempts to advance this morning have been hindered somewhat by the release of the Eurozone’s latest Consumer Price Index (CPI).

According to data published by Eurostat, February’s final CPI reading showed that headline inflation had fallen from 1.3% to just 1.1%.

This was lower than the preliminary estimate of a drop to 1.2% and saw inflation hit its lowest levels since December 2016.

The drop is likely to come as another blow to the European Central Bank (ECB) as it moves inflation even further from the bank’s target rate of 2%.

This in turn makes it even more unlikely that the ECB will seek to raise interest rates anytime in the foreseeable future, likely weighing on the EUR exchange rate.

EUR/USD Exchange Rate Forecast: Robust US Consumer Confidence to Support USD?

Looking ahead the EUR/USD exchange rate may be forced to relinquish some of its gains this afternoon when the University of Michigan publishes its latest US consumer sentiment index.

Economists forecast that while the latest reading will show a slight dip in confidence, consumer optimism will remain broadly robust, likely helping to bolster the appeal of the US Dollar.

Meanwhile EUR investors are likely to begin looking towards next week, with the focus likely to be on the Eurozone’s latest PMI figures.

Particular attention will likely be paid to these figures amid speculation that the Eurozone is losing momentum, with another moderation in growth possibly weakening the Euro exchange rate.

Luke Trevail

Luke studied Journalism at university but quickly moved into the financial sector, initially working in retail banking before joining TorFX in 2007. As a Senior Account Manager Luke assists in overseeing the management of the company’s exposure to currency volatility. He uses his years of foreign exchange experience to produce regular news updates exploring the latest currency movements.

Contact Luke Trevail