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Euro US Dollar Exchange Rate Struggles under Decidedly Risk-Off Market

Euro EUR currency news

  • Euro US Dollar Exchange Rate Falters in the Face of Renewed Safe-haven Attitudes – Investor’s ditch risky assets following vote to Brexit
  • Euro Struggles to Attract Buyers in Current Climate – Rising Eurozone uncertainty keeps shrewd traders wary of common currency.
  • Dollar Strength Possibly Hinting at Future Fed Rate Cut – Some analysts have mulled over the prospect of the Fed lowering rates if USD gains continue.
  • Forecast Clearer Once EU Parliament Convenes – Today’s meeting should outline how the EU plans to go forward now the UK is leaving the union.

The Euro US Dollar exchange rate saw swings of over half a cent yesterday after it was sent reeling last week when the UK’s referendum results were confirmed and it was announced that the UK will be leaving the European Union.

In a historic and unprecedented decision, last Thursday the UK chose to leave the European Union, an event that has sent financial shockwaves over the world and immediately struck trillions off of stock markets.

A massive surge in safe-haven demand as a result of the sheer uncertainty of the UK’s future circumstances has seen investors flock towards the safe-bet US Dollar, especially as Europe’s shaky first steps to an EU without the UK has already seen the Euro depreciate heavily.

With the future of the Eurozone also uncertain amid a rise in Eurosceptic attitudes, the Euro US Dollar exchange rate fell over 1% in the course of Monday’s session and was trading in the region of 1.1009 before European markets closed.

Euro (EUR) Lacks Buyers as Eurozone Future Still Lays Uncertain

The Eurozone is being eyed wearily as the UK’s departure from the EU has already seen Eurosceptic sentiment rising within discontented member states.

France, Greece and Italy are among a large group of EU countries that have intimated they would like their own referendum, and they will be closely watching how the UK is treated now it has started down the path.

The sheer uncertainty of the single currency’s future has caused quite a deprecation since the results were released on Friday morning. The departure of the EU’s second biggest economy has sent the markets onto a decidedly risk-averse footing and a lack of concrete plans being drawn up is doing little for investor confidence.

Safe-haven demand has lessened bond-yields, which could prove trouble for the European Central Bank’s quantitive easing schemes amid accusations that the purchased assets were already unfavourable.

Prevailing Safe-Haven Sentiment sees Euro US Dollar Exchange Rate Plummet

The unrelenting wave of uncertainly triggered by last week’s referendum has seen safe-haven demand shoot through the roof of late.

As the results came in, the US Dollar saw a massive appreciation across all its major pairings, bar the Japanese Yen, as the risk-off nature of the markets became apparent and investors dumped their riskier assets.

The fact that the US Dollar’s increased value would have pushed a Fed rate hike even further away also sent traders towards the Yen.

Seeing the US Dollar as already slightly overvalued, the ‘Buck’s’ recent immense strength has led analysts to posit that the US Federal Reserve is unlikely to raise its benchmark rate anytime soon. In fact, some analysts believe the Fed will cut rates if the current economic landscape persists as if the Dollar gets much stronger it could prove unhelpful for US trading.

Strong Data Releases Have Potential to Shift EUR/USD Forecast after EU Parliament Convenes

The Euro US Dollar exchange rate should rally if the Euro’s uncertainty can be quelled by European policy announcements as, so far, we have heard little from central banks regarding future plans.

The European Union is in for some tumultuous times as the Brexit is negotiated and with the region’s future hanging in the balance, the Euro is unlikely to make any significant permanent gains.

Later today the EU parliament comes together to discuss the UK’s Brexit.

Later in the week there will be plenty of ecostats which would have previously had a marked impact on the Euro, such as German unemployment and Eurozone inflation figures. However, with Brexit concerns so firmly in the spotlight, data releases are unlikely to have much impact for the foreseeable future.

From the US, there appears to be plenty of influential data releases, mostly due out towards the latter half of the week, with various market surveys set for release on Friday.

However, the manner in which policymakers will be reacting to last week’s results has great potential to affect markets and hopefully we should see some plans being formed this week that could have some influence over the Euro US Dollar exchange rate.