EUR/USD Exchange Rate Subdued as Markets Await FOMC Minutes
The Euro to US Dollar (EUR/USD) exchange rate is currently rangebound this morning as markets brace for the publication of the minutes from the Federal Reserve’s October policy meeting later this evening.
At the time of writing EUR/USD exchange rate is trading at around $1.1065, virtually unchanged from the European session’s opening levels.
US Dollar (USD) Capped ahead of Fed Minutes
The US Dollar (USD) is showing only limited movement this morning as market await the publication of the minutes from the Federal Open Market Committee’s (FOMC) latest policy meeting.
The Federal Reserve delivered its third consecutive rate cut last month, but signalled in its accompanying statement that it was also hitting pause on further monetary easing.
Minutes of the Fed's October FOMC meeting will be released at 2 p.m. Wednesday. Here's what economists will looking for https://t.co/WYrVb0wxaU
— Bloomberg Markets (@markets) November 20, 2019
While most analysts agree that the bank’s current monetary policy is appropriate, there is some speculation on what 2020 may bring, especially given the continued pressure from President Donald Trump to lower rates even further.
USD investors will therefore look to the minutes for more forward guidance on how the Fed may look to shape its monetary policy next year.
Seth Carpenter, economist at UBS speculates on potential rate cuts in 2020:
‘We believe that ½% growth in the first half of the year will compel the FOMC to cut. Indeed, with our Q4 forecast for GDP growth at 1.2%, we think some apprehension will start to rise even this year, but we expect them to hold off cutting until early next year.’
Euro (EUR) Flat Following ECB Financial Stability Review
The Euro (EUR) is also trading in a narrow range this morning, following the publication of the European Central Bank’s (ECB) Financial Stability Review.
While the release didn’t contain anything which would come as a surprise EUR investors, it did reaffirm that the Eurozone outlook is looking increasingly fragile.
The review read:
‘The euro area economic outlook has deteriorated, with growth expected to remain subdued for longer.
‘Downside risks to global and euro area economic growth have increased. The risks to the euro area growth outlook are tilted to the downside.’
The dour outlook is likely to increase speculation on whether new ECB President Christine Lagarde may pursue further stimulus measures in 2020.
EUR/USD Exchange Rate Forecast: PMI
Looking ahead to the latter half of the week, the Euro US Dollar (EUR/USD) exchange rate may come under pressure with the publication of the Eurozone’s latest PMI figures.
The Eurozone’s manufacturing sector has persistently underperformed in recent months and this may weigh on the Euro as the trend is expected to have continued in November.
However this could be offset by the accompanying services PMI, with the Eurozone’s service forecast to have continued its recovery after striking an eight-month low in September.
In the meantime, the publication of the Philadelphia manufacturing index may dent the US Dollar on Thursday if it shows that manufacturing activity continued to slow this month.