Euro to US Dollar (EUR/USD) Exchange Rate Slips Slightly on Safe Haven Demand
While the Euro to US Dollar (EUR/USD) exchange rate has advanced so far this week, the pairing’s gains have been limited by mixed Euro (EUR) strength, as well as some fresh demand for safe haven currencies like the US Dollar (USD).
Due to stronger Eurozone data and Federal Reserve jitters, EUR/USD may be on track to sustain another week of gains.
Since opening this week at the level of $1.13, EUR/USD has climbed almost half a cent. The pair briefly touched a weekly high yesterday, and has sustained most of its weekly gains so far as of the time of writing today.
However, if upcoming US data or news impresses investors, the Euro to US Dollar exchange rate could weaken as the week draws on.
For now, investors are highly anticipating this evening’s Federal Reserve policy decision and Friday’s Eurozone PMI stats.
Euro (EUR) Exchange Rates Benefit from Fewer Signs of Weakness in Eurozone Economy
Eurozone has been mixed in recent weeks, but more data is beginning to show signs of printing slightly better than economists expect.
As Eurozone data begins to edge above forecasts again, analysts hope it indicates that the Eurozone’s economic activity has picked up.
It followed yesterday’s Eurozone economic sentiment data from ZEW, which printed well above expectations in prints from Germany and the Eurozone overall.
While German current conditions weren’t as good as expected, the Eurozone’s overall economic sentiment index came in at -2.5 rather than the expected -18.7.
On top of some slight hopes that Eurozone economic activity is beginning to improve, the Euro (EUR) also benefitted from weakness in its rival the US Dollar (USD).
US Dollar (USD) Exchange Rates Avoid Further Losses amid Safe Haven Demand
The US Dollar (USD) has been one of the less appealing major currencies over the past week, as signs of the global economic slowdown impacting the US economy begin to dampen US sentiment.
US data has increasingly fallen short of economist projections in recent weeks, adding to evidence that the US economy is also being hit by the global slowdown.
The latest US factory orders data did little to change that, with the monthly figure coming in at 0.1% in January rather than the predicted 0.3%.
Due to recent weak US data, markets have become more concerned that the Federal Reserve could take a more dovish tone on monetary policy during this evening’s March policy decision.
As a result of these US economic uncertainties, the US was unable to capitalise on fresh market demand for safe haven currencies – though this did help to limit further USD losses.
Fresh concerns of trade tensions between the US and China left investors more eager to seek out safe havens.
Federal Reserve Decision in Focus for Euro to US Dollar (EUR/USD) Exchange Rate
Euro to US Dollar (EUR/USD) exchange rate investors are awaiting major US and Eurozone news before making any more big moves on the pair, and some of this week’s biggest movements could result from the Federal Reserve’s upcoming March policy decision.
The Fed will hold its March policy decision this evening. While the bank is not expected to make any changes to monetary policy, any shifts in tone regarding the US economic outlook or the bank’s policy outlook could be influential for the US Dollar (USD).
Many investors expect a more dovish stance from the bank. If the bank is even more dovish than expected, EUR/USD could see further gains towards the end of the week.
On the other hand though, if market fears of a dovish Fed are perceived as overblown the US Dollar could recover slightly and push EUR/USD lower again.
Euro (EUR) investors will await more strong Eurozone data before continuing to buy the shared currency.
Tomorrow’s Eurozone consumer confidence projection or Friday’s Eurozone PMI projections from Markit could support the Euro to US Dollar (EUR/USD) exchange rate if they impress investors.