EUR/USD Exchange Rate Strengthened by China’s Commitment to the Euro
The Euro to US Dollar (EUR/USD) exchange rate is making some headway this morning as investors welcomed comments from China regarding its commitment to continue purchasing the Euro (EUR).
At the time of writing the EUR/USD exchange rate is up by around 0.2% as the pairing recovers from a fresh five-month low struck on Thursday.
Euro (EUR) Exchange Rate Finds Support from China
The Euro to US Dollar (EUR/USD) exchange rate is showing signs of a recovery this morning as the currency is buoyed by China’s vote of confidence in the Euro (EUR).
China’s State Council Premier, Li Keqiang, rallied behind the single currency on Thursday as he reaffirmed the Euro’s importance to China’s foreign reserves.
Li Keqiang said:
‘The Euro is an important choice in our foreign currency reserves, and so we are continuing to buy European debt.
We hope the Euro can be strong and steady. We have a large amount of foreign reserves. We believe that foreign exchange reserves can’t just be put in one basket.’
However, while the Euro is currently ticking higher, ongoing concerns over the new populist government in Italy, continue to hang over the currency.
This could see the EUR/USD exchange rate quickly reverse course, especially if the coalition government seems to be looking to push forward with its anti-austerity policies.
US Dollar (USD) Exchange Rate Dented by Dovish Fed Minutes
Meanwhile the recent rally in US Dollar (USD) exchange rates appears to have run out of steam following the publication of the minutes from the latest Federal Reserve policy meeting.
Investors hoping for a more hawkish outlook from the US central bank were left disappointed yesterday evening as the bank indicated it would be willing to let inflation run over its 2% target for the time being.
The minutes read:
‘It was also noted that a temporary period of inflation modestly above 2% would be consistent with the Committee’s symmetric inflation objective and could be helpful in anchoring longer-run inflation expectations at a level consistent with that objective.’
The Fed is still expected to deliver a rate hike at its next policy meeting in June, with CME’s FedWatch tool placing the market odds of a 0.25% increase at around 90%.
EUR/USD Exchange Rate Forecast: Will ECB Minutes Help to Strengthen the Euro?
Looking ahead, movement in the EUR/USD exchange rate today is likely to be driven by the publication of the minutes from the European Central Bank’s (ECB) April meeting.
This could help to further strengthen Euro (EUR) exchange rates should they reinforce the bank’s view that the Eurozone economy continues to expand at a healthy pace despite slowing from the peaks struck in 2017.
Meanwhile, the release of the latest US housing data could prompt the US Dollar (USD) to continue to retreat this afternoon, should US existing home sales have seen a similar decline to new home sales last month.