The Euro has continued its strong run this morning and has just hit some key levels.
On the view of worsening US economic prospects and an improving Euro-zone outlook, traders have been shifting their holdings out of the USD and into the Single Currency. This weekend’s extensive damage caused by Hurricane Harvey has led some analysts to believe the Federal Reserve are less likely to raise interest rates before the end of the year, as it could impact too much of their economic growth. Furthermore, President Trump’s effectiveness to push through his economic and fiscal plans, which excited the markets upon his election victory, appears to be evaporating. US budget and the federal debt ceiling deadlines are now fast approaching.
A closely watched speech over the weekend by ECB president, Draghi, was a bit of a non-event and there were no new indications of any monetary policy changes discussed. Some traders felt he might use this platform to highlight concerns over the recent strength in the Euro, which could ultimately push inflation levels lower across the Bloc. However, he failed to raise these concerns, which has been seen as a positive for the Euro, as it indicates that the ECB are still on course to announce a cut-back on their money-printing programmes (QE) in Autumn. Their next policy decision will be made on Thursday 7th Sept.
As a result, the EUR/USD rate has pushed through the 1.20 mark this morning and now trades at the highest levels since the start of 2015. This movement has dragged the Pound down against the Euro, and the GBP/EUR now trades as the lowest level since Oct 2009. The GBP/USD is up nearly 2-cents from last week’s low and currently trades at a 2-week high.