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Euro to US Dollar Exchange Rate Tests Highs Once More as Safe Haven Demand Remains Soft

Euro to US Dollar Exchange Rate Remains Strong as USD Advance Attempts Fall Short 

Signs of rising safe haven demand over the past week have been limited, and the Euro to US Dollar (EUR/USD) has continued to strike highs as a result. The market’s overall optimistic outlook for the Eurozone remains among the things keeping the Euro (EUR) supported. 

Following last week’s modest EUR/USD gains from 1.1218 to 1.1248, this week’s gains may be even stronger. EUR/USD has gained over a cent so far this week. 

This morning, EUR/USD touched on a high of 1.1370 – the best level for the pair in almost a month. At the time of writing, EUR/USD trends just a little lower in the region of 1.1335. 

Investors are hesitant to keep piling into the Euro due to a lack of fresh support and mixed EU recovery fund developments. However, the US Dollar’s appeal as a safe haven has been limited and it may see further weakness as well. 

Euro (EUR) Exchange Rates Supported by Hopes of Eurozone Economic Recovery 

Not much news this week has particularly influenced the Euro outlook. 

Markets remain generally optimistic on the shared currency, due to signs of recovery in Eurozone data. Confidence that EU leaders will come to an agreement on a recovery fund to help the bloc recover from the coronavirus pandemic is also keeping the Euro afloat. 

Despite a lack of major developments in recent sessions, the Euro remains appealing due to this overall optimism about the Eurozone’s recovery. Today’s German data only further boosted those hopes. 

According to German industry body VDMA, manufacturing firms are optimistic that they’ll return to growth in 2021. 

US Dollar (USD) Exchange Rates Struggles as Safe Haven Demand Limited 

The US Dollar is a safe haven currency, a currency often seen as more appealing in times of global economic uncertainty. It has seen brief boosts in demand in recent weeks as speculation over a potential ‘second wave’ of coronavirus infections rise. 

However, these rises in safe haven demand have not been enough to sustain a strong advance in the US Dollar. 

This is because hopes for a global economic recovery persist, keeping risk-sentiment buoyant. On top of this, the US outlook is still filled with economic and political uncertainties. 

Markets are concerned with the US coronavirus situation as cases surge in the nation. The US government appears to be doing little to handle the crisis. 

On top of this, there is political uncertainty ahead of the upcoming US Presidential Election a few months from now. According to George Saravelos, Currency Analyst at Deutsche Bank: 

‘The US election is of course another driver, and we have argued a Biden win would be negative for the Dollar because policy would shift away from tariff policy and diplomacy by random tweet,’ 

Euro to US Dollar (EUR/USD) Exchange Rate Could See Further Support if Eurozone News Impresses 

Investors have little reason to sell the Euro to US Dollar exchange rate, as the Euro remains appealing and the US Dollar outlook remains filled with uncertainties. 

The Euro is already appealing due to hopes for a Eurozone economic recovery. Speculation that the EU Recovery Fund will ultimately succeed are also keeping the Euro buoyed. According to Deutsche Bank’s Saravelos: 

‘We will be closely watching to see how inflows respond to the European Recovery Fund negotiations in coming weeks. An acceleration would be a very positive sign for the Euro’ 

While the big focus for Euro investors will be EU fiscal stimulus news, upcoming data and other news may also be influential. 

Tomorrow will see the publication of French industrial production. The European Central Bank (ECB) will hold its July policy decision next week. 

If the Euro outlook keeps seeing new boosts, the Euro to US Dollar (EUR/USD) exchange rate is likely to keep holding its ground.