EUR/USD Exchange Rate Rallies on Brexit Hopes
The Euro to US Dollar (EUR/USD) exchange rate mounted a tentative recovery this morning as a sense of Brexit optimism helped to lift EUR sentiment.
At the time of writing the EUR/USD exchange rate has edged up to $1.1277 so far this morning, with the pairing poised to accelerate further depending on the outcome of a Brexit vote later in the evening.
Euro (EUR) Exchange Rate Appreciates as EU Agrees to Backstop Changes
The Euro (EUR) is trending higher against the US Dollar (USD) this morning on rising hopes that the UK will avoid a no-deal Brexit, minimising the disruption to the Eurozone economy.
This comes after last minute talks in Strasbourg late on Monday which saw Theresa May secure legally binding changes to the controversial Irish backstop.
It’s hoped that this will give the PM’s withdrawal deal a fighting chance when it faces Parliament later this evening, with a win for the government today guaranteeing that the UK will exit the EU with a deal.
However this is far from a done deal, and is likely to result in EUR investors remaining wary throughout much of today’s session.
US Dollar (USD) Softens Following Powell Interview
Meanwhile helping to limit the appeal of the US Dollar (USD) this morning is the reaction to an interview with Fed Chair Jerome Powell, broadcast overnight on Monday.
Speaking on the CBS news program ‘60 Minutes’, the Chair of the Federal Reserve spoke about the bank’s change in heart on interest rates, potential risks to US growth as well as criticism by President Trump.
Asked about the current pause in interest rates Powell said:
‘We see the economy as in a good place. We think that the outlook is a favourable one. Inflation is muted and our policy rate we think is in an appropriate place. So what we’ve said is that we would be patient … we don’t feel any hurry to change our interest rate policy.’
However Powell refuted the suggestion that the pause in its rate cycle was influenced by Donald Trump.
Instead the Fed Chairman highlighted potential risks to the US economy such as Brexit and a slowdown in China as the reason for a more cautious approach from the Fed this year.
EUR/USD Exchange Rate Forecast: Robust US Inflation to Boost the US Dollar?
Looking ahead, the Euro US Dollar (EUR/USD) exchange rate may be forced to relinquish some ground later this afternoon with the publication of the latest US CPI figures.
The data is expected to show that US inflation remained steady in February, with USD potentially appreciating if another strong core print is seen as leaving the door open for a potential Fed rate hike later in the year.
Meanwhile the focus for EUR investors will be on the release of the Eurozone’s industrial production figures on Wednesday.
Economists previously forecast a rebound in factory output at the start of the year, but given the negative reading from Germany earlier in the week we may see production contract for the third consecutive month in January, likely weakening the Euro US Dollar exchange rate.