Euro US Dollar Exchange Rate Forecast: EUR/USD Consolidates Gains Following Dovish Powell Remarks

EUR/USD Exchange Rate Buoyed by Fed Rate Cut Expectations

The Euro to US Dollar (EUR/USD) exchange rate remains on the front foot this morning as the ‘Greenback’ continues to grapple with renewed expectations of a rate cut from the Federal Reserve this month.

At the time of writing EUR/USD exchange rate is trading just shy of a weekly high at $1.1274.

US Dollar (USD) Nurses Losses Following Dovish Powell Comments

The US Dollar (USD) remains on the defensive against the Euro (EUR) this morning, after USD/EUR plummeted over half a cent on Wednesday.

This slump in USD came in the wake of comments made by Federal Reserve Chairman Jerome Powell in prepared remarks released yesterday ahead of his testimony in front of US Congress.

These saw Powell indicate that the Federal Open Market Committee (FOMC) will vote to cut interest rates this month in an effort to shield the US economy from the impact of trade tensions and slowing global growth.

Powell’s statement read:

‘Many FOMC participants saw that the case for a somewhat more accommodative monetary policy had strengthened. Since then, based on incoming data and other developments, it appears that uncertainties around trade tensions and concerns about the strength of the global economy continue to weigh on the U.S. economic outlook. Inflation pressures remain muted.’

This dispelled recent speculation that the continued strength of the US jobs market could result in any monetary easing by the Fed being fairly limited in scope, leading USD exchange rates to retreat as markets began to price in multiple rate cuts from the Fed this year.

Powell’s testimony will resume later today, which could inject some fresh selling impetus into the US Dollar if he maintains his cautious outlook for the US economy.

Euro (EUR) Exchange Rates Steady as Markets Await ECB Minutes

Meanwhile, the Euro (EUR) is steady this morning as investors brace for the release of the minutes from the European Central Bank’s (ECB) June policy meeting.

EUR investors are hoping the minutes will shed more light on the ECB’s plans to potentially inject fresh stimulus into the Eurozone in the near-term.

This may result in the Euro relinquishing some ground against the US Dollar (USD) if the minutes detail plans to either resume its quantitative easing programme or cut interest rates by the end of the year.

EUR/USD Exchange Rate Forecast: Will US CPI Figures Put Further Pressure on the US Dollar?

Also likely to influence the Euro US Dollar (EUR/USD) exchange rate today will be the release of the latest US CPI figures.

Economists forecast these will show that headline inflation in the US fell from 1.8% to 1.6% in June, whilst underlying inflation held at 2%.

This may prompt further volatility in the US Dollar as a weaker inflation reading would likely further the case for the Fed to begin lowering interest rates.


Matthew Andrews

Contact Matthew Andrews