EUR/USD Exchange Rate Struggles to Sustain Gains amid Jittery Markets
Forex markets were anxious today, keeping the Euro to US Dollar (EUR/USD) exchange rate jittery. Investors were hesitant to make big moves on either the Euro (EUR) or US Dollar (USD) as the world awaited the inauguration of Joe Biden as the next US President.
Since opening this week at the level of 1.2076, EUR/USD has been trending with a largely upside bias. This morning, EUR/USD touched on its best levels all week.
Since then though, EUR/USD has been recoiling. Today, EUR/USD has given up most of its weekly gains and at the time of writing is trending closer to the level of 1.2104 again.
The Euro to US Dollar exchange rate remains well below last week’s levels. However, if markets calm in the coming days, rising sentiment could mean that the US Dollar weakens once again.
Euro (EUR) Exchange Rates Lack Drive as Markets Await European Central Bank (ECB)
Investors have had little reason to make big moves on the Euro lately. The shared currency is being driven more by movement in its rival the US Dollar (USD) this week so far.
Markets were hesitant to make big movements on the Euro ahead of the inauguration of US President-elect Joe Biden.
What’s more, investors are awaiting tomorrow’s session, when the European Central Bank (ECB) will hold its January policy decision.
Speculation has been rising that the ECB could attempt to talk down the Euro soon, which is also making investors anxious. According to Analysts at ING:
‘Little is expected of the ECB after December’s easing measures. However, we would expect President Lagarde to say that the ECB is ‘monitoring the exchange rate carefully’, wary of the Euro’s impact on an already subdued inflation rate.’
US Dollar (USD) Exchange Rates Firm as Joe Biden Inaugurated
Following a tumultuous and unpredictable Donald Trump Presidency, today is the day the US ushers in its 46th President, Joe Biden.
Biden, who won the US Presidential Election in November, is toted to return US government policy to relative normalcy. Hopes that markets may no longer wake up to market-shaking tweets are boosting market sentiment and weighing on safe haven demand.
Still, concerns of potential unrest during the inauguration itself are keeping the safe haven US Dollar buoyant for now.
Euro to US Dollar (EUR/USD) Exchange Rate Could Climb as Markets Calm
The Euro to US Dollar exchange rate struggled to hold its ground amid US political uncertainty today, but after markets calm there may be more gains ahead for the pair.
If there are no surprises or complications at the US Presidential inauguration, political uncertainty will likely calm. This could lead to continued US Dollar weakness, and make it easier for EUR/USD to advance again.
Still, even if the US Dollar weakens again, the Euro may struggle to advance if the European Central Bank (ECB) warns over the shared currency’s strength tomorrow.
According to Yohay Elam, Analyst at FXStreet, ECB President Christine Lagarde could express concern over the Euro’s strength at the ECB decision tomorrow:
‘The ECB is unlikely to announce new measures at its first meeting of 2021. However, Lagarde may dedicate more time and use starker language to warn about the damage of the high exchange rate to the economy and to inflation’
Aside from the ECB decision, upcoming Eurozone data could also influence the Euro if it surprises investors.
Even if Lagarde attempts to talk down the Euro, strong Eurozone consumer confidence or PMI stats towards the end of the week could support the Euro to US Dollar (EUR/USD) exchange rate.