EUR/USD Exchange Rate Down as Safe Haven US Dollar Continues to Climb
Concerns about the coronavirus pandemic’s worsening impact on major economies has caused the Euro to US Dollar (EUR/USD) exchange rate to tumble in recent weeks. Despite a lack of fresh surprises, the US Dollar (USD) continues to benefit from risk-aversion today.
Last week’s US Dollar rebound pushed EUR/USD down from the level of 1.2220 to the level of 1.2075 throughout the week – a loss of around a cent and a half.
Since markets opened this morning, EUR/USD has only continued to slide, though its losses are more modest.
At the time of writing on Monday afternoon, EUR/USD is trending near a low of 1.2055. This is the worst level for the pair in over a month and a half, since the beginning of December.
Euro (EUR) Exchange Rates Lacks Resilience as Coronavirus Cases Surge
Investors are hesitant to buy the Euro (EUR) lately. It comes amid a lack of strong fresh support in the Eurozone outlook, as well as stronger demand for the shared currency’s rival the US Dollar.
The coronavirus pandemic continues to worsen across Europe as well. With more nations under lockdowns and restrictions, there is not much domestic news keeping the Euro buoyed.
Still, analysts don’t expect the Euro to fall much further despite its continued slippage. According to Valeria Bednarik, Chief Analyst at FXStreet:
’Speculative interest is still digesting the latest coronavirus-related news. Immunization through vaccines is on a bumpy start, with Pfizer announcing a delay in delivery in Europe last Friday. Nevertheless, smoother progress in vaccination is expected in the next few weeks, and so far is not a market’s concern.’
US Dollar (USD) Exchange Rates Benefit from Safe Haven Demand Ahead of Biden Inauguration
The US Dollar is a safe haven currency. It often strengthens in times of global market uncertainty.
As the coronavirus pandemic has been hurting major economies worse than expected in recent weeks, jittery markets have been avoiding risks again. This has led to a rise in demand for the safe US Dollar.
The US Dollar is also gaining on speculation that the incoming Joe Biden administration may be less concerned about the strength of the currency than the Trump administration was.
This, combined with expectations for more fiscal stimulus from the Biden administration, could continue to influence the US Dollar this year. According to Wouter Sturkenboom, Investment Strategist at Northern Trust Asset Management:
‘I would expect differences in fiscal stimulus to be a driving force for relative performance of currencies this year as it is directly linked to the economic recovery story,’
Euro to US Dollar (EUR/USD) Exchange Rate Could Resume Bullishness Soon
While the US Dollar is still rebounding today, it is doing so amid a lack of fresh upside support for the currency.
As a result, the Euro to US Dollar exchange rate could advance again if the US Dollar rebound runs out of steam.
The Euro is also more likely to advance if upcoming Eurozone news or data impresses investors. Optimistic coronavirus developments, or strong German or Eurozone economic sentiment stats tomorrow, could boost the Euro.
As for the US economic calendar, it looks relatively quiet this week. This means US Dollar investors could remain focused on market sentiment and US political developments.
All eyes are once again on US politics this week, as Joe Biden is set to be inaugurated as the next US President on Wednesday.
There have been concerns of potential unrest around the inauguration, so risk-sentiment could remain key for the Euro to US Dollar (EUR/USD) exchange rate this week.