Euro to US Dollar Exchange Rate Struggles as Markets Look to Safe Havens
The Euro to US Dollar (EUR/USD) exchange rate saw its worst week in months last week. While the losses were actually quite modest overall, it was still the best performance the US Dollar (USD) has seen in some time.
After opening last week at the level of 1.1256, EUR/USD briefly jumped higher. This move higher was short-lived though, and EUR/USD trended lower for the remainder of the week.
On Friday, EUR/USD touched on lows of 1.1191 – the worst levels since the beginning of the month. While EUR/USD was able to recover slightly from these lows before markets closed, the US Dollar (USD) has certainly been performing more strongly in recent sessions.
If the US Dollar continues to strengthen, the Euro to US Dollar’s strong streak may have come to an end for now.
Euro (EUR) Exchange Rates Limited by Delay in EU Stimulus Plans
The Euro has seen months of strong performance against its rival the US Dollar. This has been largely due to hopes for an economic rebound from the coronavirus pandemic.
However, fears that a ‘second wave’ of coronavirus infections is on the way has caused safe haven demand to rise again.
A lack of fresh support for the Euro has meant that the safer US Dollar has been able to advance more easily.
The latest meetings between EU leaders on the coronavirus recovery led to a delay in the next stimulus plan. This also weighed on the Euro.
According to Analysts at Deutsche Bank:
‘Hopes of a breakthrough on the recovery fund have been managed downwards recently, and the signs are instead pointing to an agreement no sooner than an as-yet unscheduled summit meeting in July’
US Dollar (USD) Exchange Rates Benefit from Safe Haven Demand
The US Dollar (USD) saw its best weekly gains in a month last week.
As market fears over a potential ‘second wave’ of coronavirus infections worsened, investors were more eager to buy safe haven assets.
The US Dollar is traditionally a safe haven, and has benefitted from the latest rise in safe haven demand.
However, due to market concerns over how the US is being hit by the coronavirus, it has only seen limited benefit from this safe haven demand.
Euro to US Dollar (EUR/USD) Exchange Rate Could Fall Further on Safe Haven Demand
The US Dollar has only seen limited benefit from safe haven demand in recent weeks.
However, if safe haven demand intensifies investors are more likely to buy the US Dollar.
If coronavirus fears deepen, the US Dollar’s safe haven appeal may overshadow concerns about the US economy.
The Euro would be even more likely to lose out to a safe haven US Dollar if upcoming Eurozone data or Eurozone coronavirus developments disappoint investors.
Tuesday will see the publication of the Eurozone’s June PMI projections. These will give investors a better idea of how well the Eurozone economy is weathering the pandemic this month.
Poor stats, or signs of further disagreement among EU leaders, would make it even easier for the US Dollar to gain against the Euro.
Towards the end of next week, key US growth rate and trade stats could also influence the Euro to US Dollar exchange rate.