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Euro to US Dollar Exchange Rate Regains Buoyancy as USD Recovery Short-Lived

Euro to US Dollar Exchange Rate Edges Towards Best Levels Again 

After a brief US Dollar (USD) recovery attempt earlier in the week, the Euro to US Dollar (EUR/USD) exchange rate is once again seeing bullish movement. Despite worsening coronavirus cases in some Eurozone nations, the bloc’s outlook remains much more optimistic than the US outlook. 

While the Euro’s (EUR) advances have slowed, EUR/USD has still continued to trend higher over the past week. 

EUR/USD climbed slightly from 1.1656 to 1.1778 last week. This was still a gain of over a cent, but the pair was unable to hold the week’s 2-year-high of 1.1904. 

The pair saw a brief dip at the beginning of this week as the US Dollar attempted recovery. However, EUR/USD is ultimately climbing again as the US Dollar’s weakness persists. 

At the time of writing on Wednesday, EUR/USD trends less than a cent below last week’s best levels in over two years. 

The Euro’s potential for advances may be limited though, as concerns rise about coronavirus infections in the Eurozone. 

Euro (EUR) Exchange Rate Advances Limited amid Eurozone’s Coronavirus Situation 

The Euro remains broadly appealing overall. Throughout the coronavirus pandemic, the EU and European Central Bank (ECB) have been perceived as handling the crisis well compared to other major economies like the UK and US. 

As a result, the Euro’s losses in response to a rebounding US Dollar have been limited. The Euro and US Dollar have a negative correlation and the Euro often benefits from US Dollar weakness. 

This has meant that the Euro to US Dollar exchange rate’s period of strong performance looks set to continue, even as concerns rise about worsening coronavirus cases in the Eurozone. 

Spain has seen a surge of coronavirus cases amid the ’second wave’. Speculation that the Eurozone could see fresh lockdowns has dampened the Euro’s appeal

However, analysts reckon that the Euro will remain more appealing than the US Dollar. According to Analysts at Danske Bank: 

‘Worries over virus developments outside the US have started to surface, so is now the time to get EUR negative again? 

We doubt that we will witness the large-scale closures seen during the spring and yesterday’s price action suggests that one probably needs to look for US rate rises and/or tech outperformance to get very negative on EUR/USD short term.’ 

US Dollar (USD) Exchange Rates Remain Pressured by Gloomy Outlook 

Investors briefly attempted to buy the embattled US Dollar back from its lows earlier in the week. It follows July, which was one of the worst weeks for the US Dollar in a decade. 

However, the US Dollar’s gloomy outlook persists too heavily and is keeping investors from mounting much of a recovery rally in the currency. 

The number of coronavirus cases in the US continues to surge higher, and the US government and Federal Reserve have only taken mixed action to limit its spread and protect the US economy. 

Attempts to push through more economic stimulus have become stuck in US Congress, and the Fed may become more dovish. According to analysts at ING Bank: 

‘The dynamic here seems to be that second wave challenges in the US will keep Fed policy looser for longer, thereby keeping pressure on the Dollar. Overnight, San Francisco Fed President, Mary Daly, said that the US economy will need longer support’ 

Euro to US Dollar (EUR/USD) Exchange Rate Awaiting Major US Job Stats 

The Euro to US Dollar exchange rate remains fairly resilient for now, but could upcoming US news and data cause a shift in the pair’s movement? 

Investors will continue to keep a close eye on the US coronavirus situation for signs that infections are calming. On top of this, any progress in a US Congress stimulus package for the US economy could also boost the US Dollar. 

This aside though, investors will be looking ahead to upcoming US job market stats. 

Following this afternoon’s ADP data, tomorrow will see the publication of US jobless claims data. 

Then, Friday will follow with July’s anticipated Non-Farm Payroll report. The NFP report is typically highly influential for the US economic outlook. This is likely to have an impact on the market’s US coronavirus outlook. 

As for the Euro, it is likely to remain appealing unless US data shows a big positive shift and Eurozone data disappoints more. 

Friday’s German trade balance report could cause some Euro movement. Overall though, the Euro to US Dollar (EUR/USD) exchange rate will be driven by coronavirus developments and US economy speculation.