Tensions over Italian Budget Plans Cause EUR/USD Exchange Rate Losses
The Euro (EUR) is trading lower against the US Dollar (USD) today, with Italy’s budget problems continuing to reduce EUR trader confidence.
Italy’s coalition government made its budget proposal weeks ago, but it was criticised by the European Commission (EC) who said it breached spending limits.
Both sides have traded barbs about accepting and rejecting the budget plan and a continued lack of resolution has drained EUR trader confidence.
Hinting at a potential rejection in the future, EC President John-Claude Juncker said:
‘If we accepted the [deficit] overshoot, some countries would cover us with insults and abuse, accusing us of being too flexible with Italy.’
US Dollar to Euro (USD/EUR) Exchange Rate Steady after Trump’s Fed Warning
The US Dollar (USD) is trading slightly higher against the Euro (EUR) today, despite growing tensions between President Donald Trump and the Federal Reserve.
Building on his recent criticism of the Fed, Trump labelled the US central bank as his ‘biggest threat’.
Mr Trump says the Fed is raising interest rates ‘too much’ and making the US Dollar too strong, which interferes with his objective of increasing US exports across the world.
Elaborating on his grievances, the President added:
‘The Fed is raising rates too fast and it’s independent so I don’t speak to [Fed Chair] Jerome Powell.’
The Fed is independent of Mr Trump’s authority, but there are still worries among investors that his objections could lead to fewer interest rate hikes in 2019.
Euro to US Dollar Exchange Rate Forecast: Risk of EUR/USD Losses on Optimistic Fed Minutes
The Euro’s (EUR) latest losses against the US Dollar (USD) could be extended later today, when Federal Open Market Committee (FOMC) minutes come out.
The Fed’s minutes could show that policymakers are poised to raise US interest rates in November or December this year, which would make a total of four rate hikes in 2018.
USD traders are banking on one more rate hike in 2018 and several in 2019, so any hints about such a path could push the US Dollar up against the Euro.
Outside of this data release, there could also be EUR/USD exchange rate movement on today’s and Thursday’s speeches from Federal Reserve policymakers.
Lael Brainard will be speaking today, followed by James Bullard and Randal Quarles on Thursday; if all three officials back continued US interest rate hikes then the US Dollar is likely to rise.