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Euro to US Dollar Exchange Rate Down from 2-Year-Best despite Poor US Employment Data

Euro to US Dollar Exchange Rate Sheds Half of Last Week’s Gains

Despite today’s disappointing US data, the Euro to US Dollar (EUR/USD) exchange rate continues to tumble. The Euro (EUR) has been falling since it touched its best levels since 2018 yesterday.

After opening last week at the level of 1.1795, EUR/USD spent the week trending with an upside bias. EUR/USD ultimately gained over a cent and closed the week at the level of 1.1905.

This week though, EUR/USD has seen broad fluctuations. Yesterday, EUR/USD briefly touched on a high of 1.20 for the first time in over two years, since May 2018.

Since then though, EUR/USD has shed around half of last week’s gains. EUR/USD trends closer to the level of 1.1835 at the time of writing on Wednesday afternoon.

Euro (EUR) Exchange Rates Fall Back as Markets Take Profit from Highs

The Euro to US Dollar (EUR/USD) exchange rate’s brief scrape with the key 1.20 level yesterday left the Euro recoiling. Investors sold the shared currency from its best levels in profit-taking due to concerns that the currency had become too strong.

On top of this, the Euro was hit by comments from European Central Bank (ECB) Chief Economist Philip Lane. Lane said the Euro exchange rate did matter for monetary policy.

According to Kenneth Broux, FX Strategist at Societe Generale:

‘(Lane’s comment) shows that the ECB is not ignoring what is happening on the inflation front

The risk is that if inflation undershoots the target, the stronger the Euro becomes.

It’s interesting because it shows the ECB’s being rattled by this incessant appreciation of the Euro, or decline of the Dollar,’

US Dollar (USD) Exchange Rate Rebound Slows as US Job Report Disappoints Investors

The US Dollar has seen yet deeper losses in the past week, since the Federal Reserve indicated that its monetary policy would be aimed more towards employment than fighting inflation.

This indicated to markets that US monetary policy would remain ultra-low for a long time to come, and the US Dollar plummeted as a result.

The US Dollar continued to tumble right until it hit major lows against the Euro yesterday. Since then though, the US Dollar has been rebounding strongly in profit-taking as investors buy it back from its cheapest levels.

Today’s US employment data from ADP dampened the US Dollar’s recovery potential though. The data showed about half as many jobs created as expected, worsening concerns about the upcoming US Non-Farm Payroll report.

Euro to US Dollar (EUR/USD) Exchange Rate Could Find Support in Late-Week Data

The Euro to US Dollar (EUR/USD) exchange rate only just fell back from a two year high of 1.20, but the pair could still return to near those highs soon.

The Eurozone outlook is still more optimistic than the US outlook. What’s more, the US outlook has taken another hit from Federal Reserve news, so the US Dollar is likely to see continued pressure.

If upcoming Eurozone data continues to impress and upcoming US data disappoints, the pair could climb again towards the end of the week.

Thursday will see the publication of the Eurozone’s final August PMIs and July retail sales. They will give investors a better idea over how the Eurozone economy has been weathering the coronavirus pandemic in Q3 so far.

US trade and non-manufacturing PMI data will follow in the afternoon, but US Dollar investors are more eagerly awaiting Friday’s Non-Farm Payroll report.

The US NFP data from August, as well as US coronavirus and political developments, are likely to influence the Euro to US Dollar (EUR/USD) exchange rate before markets close for the week.