Euro to US Dollar Exchange Rate Trending Near Weekly Best amid German Growth Report
Some decent Eurozone data today was enough to help the Euro to US Dollar (EUR/USD) exchange rate to hold its ground. Investors sold the US Dollar (USD) today, as the angle of coronavirus concerns shifted towards US monetary policy.
EUR/USD spent most of last week trending near a decade low of 1.07. The pair ultimately recovered and advanced at the end of the week though.
Movement has been mixed due to bursts of demand for the safe haven US Dollar, but EUR/USD has been gradually climbing higher within the interbank region of 1.08. At the time of writing today, EUR/USD is trending closer to its best levels in almost two weeks.
The Euro (EUR) is largely benefitting from weakness in the US Dollar. As rival currencies, they share a negative correlation.
Euro (EUR) Exchange Rates Steady on Rival Weakness and Solid Eurozone Stats
The primary cause of EUR/USD gains today was US Dollar (USD) weakness. Some of the latest domestic factors in the Eurozone outlook may also be supporting the Euro’s appeal.
Germany’s key Q4 2019 growth rate results were published today. While the data showed growth slowing to a stagnant 0.0% quarter-on-quarter, this data was in line with expectations.
France’s latest business confidence data, on the other hand, did come in a little stronger than forecast.
However, while the Euro rebounded from yesterday’s levels, it is struggling to sustain its highs. Investors are anxious about the coronavirus spreading in Italy, and there are concerns that this will increasingly dominate the Eurozone outlook.
According to John Mahoney, Senior Market Analyst at IG:
‘With tourism to and from China plummeting, there is little reason to expect any different in Europe if this virus spreads throughout the continent. The declines seen for largely European-focused airlines such as easyJet and Ryanair highlight the increasing fear that we will see travel locked down closer to home, with obvious knock-on implications for consumer activity should that occur.’
US Dollar (USD) Exchange Rates Tumble as Market Consider Possibility of Fed Rate Cut
The US Dollar benefitted strongly from safe haven demand yesterday. It came amid expectations that the US economy would remain resilient to the coronavirus.
Overnight though, markets begun to consider the possibility that the coronavirus could damage the US economic outlook if the situation worsens enough.
As a result, speculation rose that the Federal Reserve could cut US interest rates in order to limit the virus’ impact on the US economy. As Fed rate cut speculation rose, the US Dollar fell.
According to Rodrigo Catril, Senior FX Strategist at National Australia Bank, the Fed has more room to act than other major central banks:
‘We’ve seen not only a repricing of Fed expectations, but a bigger re-pricing because the Fed is the one that can actually do something in terms of moving the cash rate,’
Euro to US Dollar (EUR/USD) Exchange Rate Could Slump Again if Coronavirus Fear Hits Europe
The Euro (EUR) has thus far been surprisingly resilient this week, even as the coronavirus begins to spread in Italy. However, the Euro’s resilience could be short-lived if the situation worsens.
Even as the US Dollar (USD) weakens today, the Euro’s gains have been limited by rising coronavirus concerns in the Eurozone. If major regions of Europe end up under lockdown, it could have a notable impact on the Eurozone’s economic activity.
These fears could hit the Euro. They may also keep the US Dollar under pressure, as investors await more comments from Federal Reserve officials.
If the Fed takes a more dovish tone on the economy in upcoming comments, Fed rate cut bets could rise and the US Dollar could remain weak.
Tomorrow’s economic calendar will be fairly quiet, leaving the Euro to US Dollar (EUR/USD) exchange rate driven mostly by coronavirus developments.