EUR/USD Exchange Rate Sinks as Hopes Grow for Multi-Trillion-Dollar US Stimulus Package
The Euro to US Dollar (EUR/USD) exchange rate fell by -0.5% today, with the pairing currently trading around $1.21.
The US Dollar (USD) rose today as risk-off market mood increases following news that China was intensifying Covid-19 measures to limit the nation’s rising infection rate.
However, ‘Greenback’ investors are also optimistic that president-elect Joe Biden would push for a multi-trillion-dollar stimulus package.
Ricardo Evangelista, a senior analyst at ActivTrades, commented:
‘To a large extent, the greenback’s losses over the last few months are a reflection of investors’ faith in the continuation of the Fed’s dovish monetary policies for the foreseeable future.
‘However, as the markets digest the recent political developments in Washington, with the Democrats now controlling the Presidency, Senate and Congress, the probability of extensive fiscal stimulus being deployed has grown, which in turn increases the likelihood of a change in stance from the Federal Reserve and an anticipated end to the very low interest rates.’
As a result, demand for the safe-haven ‘Greenback’ has risen today on growing concerns over increasing Covid-19 numbers throughout Europe and China.
Euro (EUR) Falls as Europe Suffers from Rising Covid-19 Cases
The Euro fell against the stronger USD today owing to growing concerns over Europe’s increasing Covid-19 infection numbers.
Today also saw news that Franc could close its boarders with Britain and under countries to reduce an influx of the new Covid-19 variants.
Arnaud Fontanet, a member of one of the scientific advisory councils to the French Government, said:
‘It is important that we consider whether we need to close the borders to a limited number of countries, notably the United Kingdom and Ireland.’
In Eurozone economic data, today saw January’s Sentix Investor Confidence, which beat forecasts and rose to 1.3.
Sentix said in its note:
‘Now that more vaccines have been approved, investors apparently expect a quick implementation of the vaccine strategy and thus a definitive end to the economic and personal freedom restrictions.’
EUR/USD Outlook: Could Rising European Covid-19 Cases Further Limit the Single Currency?
US Dollar (USD) traders will be looking ahead to tomorrow’s speeches from members of the Federal Reserve’s Board of Governors.
Any upbeat comments about America’s economy going forward could limit demand for the safe-haven ‘Greenback’ as global risk-sentiment improves.
Tomorrow will also see the publication of December’s NFIB Business Optimism Index.
Again, if this improves, we could see demand for the safe-haven USD suffer.
However, with Covid-19 cases rising worldwide, we should see the US Dollar benefit as investors become increasingly jittery.
Added to this, the Euro (EUR) is likely to remain subdued as the outlook for the Eurozone economy continues to worsen as coronavirus cases continue to rise throughout Europe.