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US Dollar Hits 1-Week High Versus Euro, as Trump Escalates Trade War

Market CommentaryUS Dollar Hits 1-Week High Versus Euro, as Trump Escalates Trade War
US Dollar Hits 1-Week High Versus Euro, as Trump Escalates Trade War
Image credit: Nerijus J.

Welcome to Pure FX's latest update of the US dollar to euro interbank exchange rate.

This tells you when it's an excellent time to exchange US dollars to euros, for your money transfer!

The greenback jumps versus the common currency! The US dollar to euro interbank exchange rate has hit 0.8570 in the last day, its highest in 1 week, or since July 5th.

The US dollar has strengthened against the euro, because US President Donald Trump has renewed his threat to impose an extra $200 billion of tariffs on China's exports to the USA.

This has lifted the buck, because if Mr. Trump imposes these tariffs, China's goods in America will become more expensive. In turn, this will accelerate the rise of US inflation.

This has boosted the US dollar, because when US inflation rises, the Federal Reserve, America's central bank, will feel greater pressure to lift interest rates faster, above their current 2.0%.

What's more, the greenback has also risen, because financial markets forecast that, if a trade war emerges, America's economy will be more able to withstand it than other major countries.

This has raised up the buck, because America is a vast continent with lots of resources, unlike the UK, Eurozone or Japan. This favours the USA in the event of a trade war!

Euro Weakens, as ECB Phrase "Through The Summer" Unclear

Moreover, the US dollar to euro interbank exchange rate has also strengthened, because European Central Bank (ECB) policymakers are debating a phrase in their recent guidance.

The euro has lost out, in particular as ECB executives said in June that they'd raise Eurozone interest rates "through the Summer" of 2019, yet aren't sure what "through the Summer" means.

One ECB policymaker told Reuters this week that "through the Summer" means after September 21st 2019, adding that "this is the only possible interpretation", thus weakening the euro.

Yet another central bank executive has told Reuters that "you cannot tie yourself for more than a year", and that "through the Summer" may mean in July 2019, so dragging down the euro.

This has weakened the common currency, because the ECB's debate confuses financial markets as to when the Eurozone's central bank plans to lift interest rates above their current 0.0%.

Given this, the US dollar has hit this 1-week high versus the euro, and may rise further in future!

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Please bear in mind, this article is Pure FX’s opinion only and does not constitute advice. Moreover, the exchange rates referred to in this article are the interbank rates, which are the rates at which banks and financial institutions buy and sell currency to each other. Therefore these exchange rates cannot be accessed by individuals or SMEs, and are not the same rates that Pure FX can offer. To get a free exchange rate quote, call us on +44 (0) 1494 671800, or email peter.lavelle@purefx.co.uk.

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