EUR USD Exchange Rate Trends Strong despite Lack of Strong Eurozone Support
Investors continue to buy the Euro to US Dollar (EUR/USD) exchange rate today. The pair is on track to see impressive gains this week, even though there has not been significant support for the Euro (EUR) in recent sessions.
Following last week’s fairly modest gain within the region of 1.18, EUR/USD has seen stronger advances this week.
EUR/USD is on track to sustain over half a cent of gains this week and close in the interbank region of 1.19, barring a potential late-week drop. Yesterday, EUR/USD briefly touched its best level in over three months, since mid-August.
The US Dollar (USD) has been unable to hold its ground against the Euro. It is being sold as investors are more willing to take risks, and have been selling safe havens like the US Dollar.
Euro (EUR) Exchange Rates Benefitting from Rival Weakness
As has often been the case recently, the Euro is advancing largely due to weakness in its biggest rival, the US Dollar.
The two currencies often see a negative correlation, so EUR often strengthen when USD is falling and vice-versa.
This has been the primary cause of EUR/USD gains. It comes despite the market’s own concerns with the Eurozone outlook.
The coronavirus pandemic continues to hit major Eurozone economies hard. According to Yohay Elam, Analyst at FXStreet, Germany’s Covid19 woes are limiting further EUR/USD gains:
‘Germany recorded its one-millionth COVID-19 case, active infections remain high and the curve is not bending lower. Chancellor Angela Merkel and regional leaders agreed to extend the lockdown through December 20 and easing could have to wait for after Christmas.’
US Dollar (USD) Exchange Rates Slide on Risk-Sentiment and US Economic Woes
The US Dollar is a safe haven currency. It often strengthens in times of market uncertainty, but it weakens when markets are more willing to take risks.
As a result, the latest global political developments have led to the US Dollar tumbling. Investors have been heading for riskier assets in recent weeks.
It comes amid optimistic developments in coronavirus vaccine news, as well as hopes for a smooth transition for the US Presidency into a Joe Biden administration in January.
Poor US data recently, as well as a dovish tone in the Federal Reserve’s latest meeting minutes, weighed further on the US Dollar’s appeal. According to Rikiya Takebe, Senior Strategist at Okasan Online Securities:
‘The US Fed’s determination to keep interest rates low, which is in line with other major central banks, has also led to Dollar-selling,’
Euro to US Dollar (EUR/USD) Exchange Rate Could be Driven by Key Data Next Week
The Euro to US Dollar exchange rate has been driven largely by global market sentiment and US Dollar weakness lately. However, if the Eurozone’s economic outlook sees any surprises on upcoming data, the Euro could drive movement more instead.
Next week will see the publication of a slew of key Eurozone and US ecostats.
German inflation figures will be published on Monday, with final November PMIs beginning to come in on Tuesday for both the Eurozone and the US.
Towards the end of next week, highly influential Eurozone retail stats and US Non-Farm Payrolls will be published as well.
Of course, developments in the Eurozone and US coronavirus situation will continue to influence the Euro to US Dollar (EUR/USD) exchange rate as well.