The Euro US Dollar (EUR USD) exchange rate surged this morning following the announcement that the EU had signed a new trade agreement with Japan.
Euro (EUR) Strengthened by EU-Japan Free Trade Deal
Euro sentiment jumped today as it was announced that the European Union and Japan had reached a formal agreement to outline a new free-trade deal.
While a the details of the full agreement are yet to be ironed out, it is hoped that the removal of tariff barriers will hope promote further trade between the two economic areas.
In signing the agreement in Brussels today the president of the European Council, Donald Tusk said;
‘Although some are saying that the time of isolationism and disintegration is coming again, we are demonstrating that this is not the case,’ whilst adding that the deal was about more than just trade and was evidence of ‘the shared values that underpin our societies, by which I mean liberal democracy, human rights and the rule of law.’
US Dollar (USD) Slides as Fed Minutes Point to Inflation Tensions
The US Dollar was forced to cede some of its recent gains yesterday evening following the release of the FOMC minutes from the Federal Reserve’s June policy meeting, in which the central bank voted to raise interest rates for the second time this year.
However despite voting for the hike last month it appears Fed policymakers are split over the potential of a third rate hike later in the year over disputes over the potential for a recovery in inflation over the coming months.
Many questioned the idea of raising interest rates in the face of soft inflationary pressure and poor US economic data, with more hawkish members arguing that the current conditions were just temporary.
EUR USD Forecast: Fall in German Industrial Production to Weigh on Euro?
Looking further ahead the EUR USD exchange rate may tumble on Friday with the release of Germany’s latest Industrial Production figures.
Analysts forecast that product growth will have slipped from 0.8% to 0.3% in May, with many fearing that Germany will report another fall in production of consumer goods after the declined 0.7% in the previous month.
Meanwhile the US Dollar could see some weakness later this afternoon with the release of ISM’s domestic Non-Manufacturing PMI for the month of June, with the activity in the US service sector expected to slow slightly last month.
Current Interbank Exchange Rates
At the time of writing the EUR USD exchange rate was trending around 1.1389 and the USD EUR exchange rate was trending around 0.8777.
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