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Euro to US Dollar Exchange Rate Holding Near 2-Month-Best amid Brexit and Central Bank Speculation

Euro to US Dollar Exchange Rate Avoids Losses despite Lack of Eurozone Support

Despite investors having little domestic reasons to buy the Euro (EUR) lately, the Euro to US Dollar (EUR/USD) exchange rate has been able to keep trending near its best levels since markets opened today. This has been largely due to weakness in the US Dollar (USD).

In fact, despite weak Eurozone data, EUR/USD has seen three weeks of increasingly strong gains since the beginning of the month.

Last week’s EUR/USD gains were particularly strong and the pair advanced from 1.1036 to 1.1157, sustaining over a cent.

Since markets opened today, movement has been fairly narrow amid a lack of major domestic news, though EUR/USD did briefly touch on a fresh high of 1.1177. This was the best level for EUR/USD since the 25th of August.

Euro (EUR) Exchange Rates Benefit from Brexit Hopes and Rival Weakness

In recent weeks, German and Eurozone data has continued to indicate that the Eurozone is suffering from slow economic growth, and Germany’s economy may still be seeing contraction.

Despite this data giving investors no reason to be optimistic about the Euro, the shared currency has been benefitting from more global news.

As the Brexit process has seen notable progress in recent weeks, with the UK and EU finally reaching a new deal, markets expect the Eurozone will benefit from a close UK-EU relationship as well. As a result, Brexit developments have supported Euro strength.

As well as Brexit news, the Euro has benefitted from weakness in rivals, especially the US Dollar. The Euro and US Dollar share a negative correlation, so the Euro often benefits from US Dollar weakness.

US Dollar (USD) Exchange Rates Tumbling on Federal Reserve Rate Cut Bets

The Euro has been benefitting from US Dollar losses in recent weeks, as rising signs of weakness in the US economy have led to higher bets that the Federal Reserve could cut US interest rates lower.

Many investors are already betting that the Fed will cut rates again at its 30th of October policy decision next week, and some are betting that more rate cuts will follow into next year.

Rate cut bets are persisting amid weakening US datasets and speculation that the US economy could head towards recession in the coming months.

It follows last week’s US production stats, which largely disappointed investors. US Dollar movement has also been limited by uncertainty over US-China trade relations, and safe haven demand is benefitting other currencies like the Japanese Yen (JPY) more than the US Dollar.

Euro to US Dollar (EUR/USD) Exchange Rate Awaits Political and Central Bank News

With this week’s Eurozone and US economic calendars a little quieter until Thursday, the Euro to US Dollar (EUR/USD) exchange rate will likely be more global factors like politics, trade, and central bank speculation for now.

The Euro is still benefitting from optimistic Brexit news, due to hopes that the Eurozone economy will benefit from a good post-Brexit relationship between the UK and EU.

As a result, any further evidence that the Brexit deal will succeed and lead to a softer Brexit would support the Euro.

US-China trade developments are more likely to influence the US Dollar though, and if these or Federal Reserve comments influence Fed interest rate cut bets this could be especially influential to EUR/USD.

Looking ahead to later in the week, Thursday’s key Eurozone PMI projections from Markit and US durable goods orders could also influence the Euro to US Dollar (EUR/USD) exchange rate.