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Euro exchange rate slips as Euro Zone economy slows down

Euro exchange rate slips as Euro Zone economy slows down

27 November 2018

The Euro has fell down against the US dollar, losing its earlier gains. It was due to the comments of Mario Draghi, the head of European Central Bank, that informed the Euro Zone economy growth is slowing down.

Normal situation

Mario Draghi and its two lieutenants informed on Monday that the Euro Zone is losing some momentum when it comes to economic growth, but claimed it was normal thing. The ECB executives stated this slowdown is not enough to change the bank’s plan to backtrack stimulus program further. Draghi offered his view on the matter after data from Germany that showed business morale falling down for third month in a row and this time by more than expected in forecasts. All these have made investors eager to sell euros and the exchange rate against the dollar went down. Earlier gains of the common currency were annulled. On Monday morning the Euro went up as Italy show signals of cutting budget deficit target as per European Union’s wishes. The Italian government is on the road to have a deficit target of only 2 percent of gross domestic product. Such level of deficit will allow Italy for avoiding the disciplinary action from EU.

Pound followed the lead

British Pound as well fell down against the greenback. The reason was the same as any other changes for exchange rates of British Pound in recent months: tensions around the Brexit deal. On Sunday, the EU leaders and the United Kingdom reached a deal that Brexit will effectively takes place in March, but close trade connections between two parts will be sustained. However, the British Parliament is now widely thought to decline to approve the deal, as it is highly divided.

Reasons for good US run

The US dollar’s gains on Tuesday were due to Federal Reserve Vice Chair backing further interest rate hikes at the same time stating that monitoring economy in US is important in taking decision about interest rates. Richard Clarida took a very dove approach in his speech as he admitted determining maximum level of unemployment and neutral interest rates is posing difficulties. The comments came after another sleep market drop. Last month Jerome Powell, the chairman of FED, stated that the institution may rise interest rates above the neutral point if the remarkably positive US economy will keep it up. Powell’s speech was considered to be a hawkish one, so the newest opinion of his deputy are quite different. Clarida’s comments are seen by experts as confirmation that FED is not aiming for a neutral interest rate, but if the economy allows it, they will go for it. Slower worldwide economic growth and stock markets that have been very shaky recently have make experts believe that FED will sooner than expected stop its cycle of tightening rates policy.

Look ahead

This week investors will especially focus on Jerome Powell’s speech deliver on Wednesday as well as minutes from FED’s meeting that took place on 7th-8th November. They will be curious whether those will give signs on how many further interest rates hikes might be expected in the US. In addition, on November 30th there is held a meeting on G20 summit in Argentine between US President Donald Trump and Chinese President Xi Jinping that will mainly focus on trade tensions between two countries.

These events can of course also have an impact on the EUR CHF exchange rate, which is important to us at ExchangeMarket.ch. We know that a good euro rate is important for our clients, regardless of whether they are frontaliers, people selling a house abroad or buying a car abroad. To find the best exchange rates, visit our currency converter and compare the best exchange rates in Switzerland. We offer you the best Euro exchange rate in Switzerland and this absolutely without any fees or other costs. If you have questions about our EUR CHF exchange rate or the conditions, please contact us. We will be happy to answer any questions.

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