Euro US Dollar Exchange Rate: EUR/USD Slides on Italian Budget Upset

Fears of EU-Italy Clash over Spending Drags EUR/USD Exchange Rate Down

The Euro (EUR) has fallen by -0.3% against the US Dollar (USD) today, with losses coming from a strong US Dollar and concerns about the Italian budget.

This decline has pushed the EUR/USD exchange rate near to a six-week low, and emphasises current uncertainties among Euro traders.

The Italian budget issue concerns spending limits – Italy’s new coalition government has proposed an ambitious budget plan which goes beyond current EU limits.

Simmering Euroscepticism has led Italian Deputy Prime Minister Luigi Di Maio to accuse the EU of ‘bringing terrorism to the financial markets’, which has only worsened tensions between Italy and the EU leadership.

US Dollar to Euro (USD/EUR) Exchange Rate Rises 0.3% on USMCA Trade Deal

The US Dollar (USD) has also advanced against the Euro (EUR) today thanks to news of a provisional trade agreement between the US, Mexico and Canada.

The United States-Mexico-Canada Agreement (USMCA) has been cautiously welcomed by analysts and economists, although some have questioned just how ground-breaking the new deal is.

The general sense among markets is of relief, as there had been initial concerns that Canada would be excluded from the deal.

Euro to US Dollar Exchange Rate Forecast: Are EUR/USD Losses ahead on Fed Chair’s Speech?

The Euro’s (EUR) recent losses against the US Dollar (USD) could extend in the near-term, when Federal Reserve Chair Jerome Powell gives a speech this afternoon.

Mr Powell’s topic will be ‘The Outlook for Employment and Inflation’, so he could make remarks that support the US Dollar.

In the best-case scenario for USD traders, Mr Powell could predict that employment levels will continue to rise alongside higher inflation, which will raise the odds of more interest rate hikes.

Economists are currently predicting a fourth 2018 interest rate hike in November or December, so if Mr Powell hints at another rate hike before 2019 then the US Dollar could rise.

EUR/USD Outlook: Will Eurozone Retail Sales Stats Boost Euro Demand?

Beyond today’s US central bank news, the Euro to US Dollar exchange rate (EUR/USD) could recover on Wednesday morning’s Eurozone data.

This will consist of composite and services PMIs for September, alongside retail sales stats for August.

The services PMI is tipped to show a faster pace of sector activity, although a composite slowdown is also predicted.

The retail sales stats could erase any negative effects from a slowing composite reading and boost the EUR/USD exchange rate, as increased sales are forecast on the month and the year.

Adam Solomon

Adam joined the team at TorFX soon after graduating from University in 2005 with a degree in Journalism. Since then Adam has advanced to become both Head of Trading and Head of Treasury. His keen interest in the currency market and knowledge of what drives exchange rates makes him perfectly positioned to produce regular market updates focused on the movements of the major currencies.

Contact Adam Solomon