EUR/USD Exchange Rate Rangebound as Investors Eye EU Summit Developments
The Euro to US Dollar (EUR/USD) exchange rate held steady today, with the pairing currently trading around $1.141.
The Euro (EUR) rose against many of its peers today on hopes over a crucial milestone as the Eurozone’s governments look set to form a consensus on a Covid-19 recovery fund.
Although lower than the initial proposal of €500 billion, the new grant is agreed at around €390 billion – still a significant boost for the Eurozone’s struggling economy.
Valentin Marinov, a strategist at Credit Agricole SA, commented:
‘A deal on the EU recovery fund should foster fiscal solidarity in Europe and create a massive new pool of high-quality, euro-denominated bonds.’
In Eurozone economic data, today saw the release of Germany’s latest Producer Price Index for June, which fell below consensus at 0%.
As a result, EUR investors are becoming increasingly concerned about the Eurozone’s largest economy’s ability to recover from the Covid-19 crisis.
US Dollar (USD) Steady as Uncertainties Rise Over the US’ Economic Recovery
The US Dollar (USD) has continued to struggle this week following last week’s release of US consumer confidence data. Despite consumer morale beating forecasts in June, many ‘Greenback’ traders remain concerned for the world’s largest economy.
Lynn Franco, senior director of economic indicators at The Conference Board, said:
‘The re-opening of the economy and relative improvement in unemployment claims helped improve consumers’ assessment of current conditions.’
‘Looking ahead, consumers are less pessimistic about the short-term outlook, but do not foresee a significant pickup in economic activity.’
Nevertheless, with the US facing a potential resurgence of Covid-19, many traders have avoided the US Dollar.
Any further instances of the American economy suffering from another wave of coronavirus cases would, however, dampen risk sentiment and boost demand for safe-haven currencies.
Jamie Dimon, CEO of JPMorgan Chase, was also pessimistic about the American economy, saying:
‘[We’re] going to have a much murkier economic environment going forward than you had in May and June, and you have to be prepared for that.’
EUR/USD Outlook: Could an EU Recovery Fund Consensus Boost the Single Currency?
US Dollar (USD) investors will be looking ahead to tomorrow’s release of June’s Chicago Fed National Activity Index. Any improvement in the US economy would prove USD-positive.
The Euro (EUR) will continue to be driven by news surrounding the European summit’s discussions on the Covid-19 recovery fund. If a consensus emerges, then we could see the single currency soar.
EUR investors will also be awaiting tomorrow’s speech from Luis De Guindos, the Vice-President of the European Central Bank (ECB). Any dovishness from the ECB, however, would prove EUR-negative.