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Euro to US Dollar Exchange Rate Recoils from 3-Week-Best after Thursday Surge

Euro to US Dollar Exchange Rate Struggles to Hold Fortnight Best as US Dollar Steadies

The US Dollar (USD) saw broad losses on Thursday that helped the Euro to US Dollar (EUR/USD) exchange rate to see significant gains. However, as investors rush away from currencies correlated to risk and trade today, the US Dollar is steadying.

Since opening this week at the level of 1.0850, EUR/USD has been trending with an impressively solid upside bias. Its rally gained steam almost every day of the week and the pair gained around a cent yesterday alone.

This morning, EUR/USD touched on a high of 1.1047. This was the best level for the pair in over three weeks – since the beginning of the month. EUR/USD has since slipped slightly and trends closer to the level of 1.1000 at the time of writing.

Looking ahead, coronavirus jitters and central bank bets will remain the focus for markets. Next week’s key Eurozone and US data could also influence the Euro to US Dollar exchange rate.

Euro (EUR) Exchange Rates Steady after Thursday Surge on Rival Weakness

Even despite the market’s mixed Eurozone outlook, the Euro has been among this week’s best performing major currencies. This has largely been due to broad weakness in the currency’s biggest rivals.

As the Pound (GBP) plummeted on revived Brexit fears and concerns over Britain’s economic performance, and the US Dollar (USD) was hit by coronavirus jitters, the Euro benefitted from losses in both rivals.

According to Marshall Gittler, Analyst at BDSwiss Global:

‘Probably there’s a significant amount of carry trade unwind that’s helping to push the Euro back up,’

The Euro was able to hold most of its gains today. This is despite concerns over the coronavirus spreading in Europe, as well as a lack of solid evidence that the Eurozone economy is recovering from months of slowdown.

Today’s Eurozone data remained mixed. French growth and inflation were a little underwhelming, but German unemployment was stronger than predicted.

US Dollar (USD) Exchange Rate Steadies but Federal Reserve Rate Cut Bets Remain High

The US Dollar experienced a broad and sharp selloff yesterday, as fears over Covid-19’s potential impact on the US economy worsened.

US President Donald Trump’s attempts to calm markets over the virus have not had much impact.

As the Federal Reserve is perceived as having more room to manoeuvre on monetary policy than other major central banks, Federal Reserve interest rate cut bets have risen significantly on coronavirus jitters.

Many analysts now predict that the bank could cut US interest rates as soon as March. According to Kevin Warsh, Former Fed Governor, multiple major central banks should cut interest rates:

‘Today, the novel coronavirus is a material risk to the economy,

It represents an unexpected shock, and the Federal Reserve should lead the world’s central banks in taking immediate action.

Global action would help make the most of scarce policy ammunition,’

Euro to US Dollar (EUR/USD) Exchange Rate Investors Await Coronavirus and Data Developments

Following this week’s sharp shifts in Euro to US Dollar exchange rate movement, volatility in both currencies has significantly risen.

As a result, both the Euro and US Dollar could be increasingly sensitive to developments in the coronavirus next week.

If Covid-19’s perceived impact on the US economy or Fed rate cut bets worsens, the US Dollar may struggle to recover some of the past week’s losses.

On the other hand though, as the virus spreads in Italy it could still have a stronger downside effect on the Euro’s movement.

As well as coronavirus developments, EUR/USD investors will react to major upcoming Eurozone and US data.

Eurozone and US PMIs, as well as Eurozone inflation, US factory orders and US Non-Farm Payroll data will be carefully watched by Euro to US Dollar (EUR/USD) exchange rate investors throughout the week.