Euro to US Dollar Exchange Rate Tumbles as USD Sees Rising Demand
Market demand for the US Dollar (USD) as a safe haven continues to build stream, leading to losses for the Euro to US Dollar (EUR/USD) exchange rate. Demand for the Euro (EUR) is slipping due to US Dollar strength and Europe’s worsening coronavirus outlook.
EUR/USD may be in for another week of fairly steep losses. Since opening this week at the level of 1.1120, EUR/USD has generally been trending lower.
At the time of writing on Wednesday, EUR/USD is trending near a low of 1.0903. This is the worst level for EUR/USD since the end of February, and it follows last week’s slump.
EUR/USD is already 5 cents below the yearly high seen at the beginning of last week.
The Euro lacks the support it needs to hold against a US Dollar recovery. Investors of both currencies are anticipating action from officials to support economies from the coronavirus pandemic.
Euro (EUR) Exchange Rates Struggle as Europe’s Coronavirus Concerns Worsen
The broad strength the Euro saw earlier in the month has considerably faded. Investors looking for safe havens now prefer to buy the Euro’s rival, the US Dollar.
While the Euro is fairly appealing against riskier majors, it is coming under increasing pressure from the coronavirus pandemic.
Europe is one of the regions suffering worst from the crisis, and as the Eurozone’s economic outlook worsens the Euro’s appeal is doused.
According to Valeria Bednarik from FXStreet:
‘Italian PM Conte urged EU leaders to consider issuing a joint debt in the Union to help the economy recover from the coronavirus crisis. German Chancellor, Angela Merkel said that Germany will do ‘whatever is necessary,’ to limit the impact of the outbreak. Uncertainty is high, which worsens the negative sentiment.’
US Dollar (USD) Exchange Rates Surging on Safe Haven Demand and Stimulus Hopes
The Federal Reserve has considerably eased US monetary policy over the past few weeks. While this briefly led to a US Dollar plummet, the eased monetary policy has now been largely priced in.
As a result, the US Dollar is benefitting more from safe haven demand again. With the coronavirus pandemic worsening across the globe markets are panicking and rushing for safe havens.
The US Dollar is currently benefitting strongly from safe haven demand as other safe haven rivals struggle to advance much more than they already have.
On top of this, hopes for the US government to ramp up fiscal policy to protect the economy from the crisis are rising as the Federal Reserve runs out of options. According to Jane Foley, Senior FX Strategist at Rabobank:
‘This is a story of a strong Dollar. The Fed’s action was better than doing nothing, but at the same time the focus is on signs of when this crisis will end,
Everyone understands the shortfalls of central banks. They can’t actually physically get people back through the doors of shops.’
Euro to US Dollar (EUR/USD) Exchange Rate Bearishness May Continue
With the Euro gradually seeing more weakness from coronavirus concerns and the US Dollar benefitting more and more from safe haven demand, the Euro to US Dollar (EUR/USD) exchange rate could be in for further gains.
Investors of both the Euro and US Dollar are highly anticipating fresh policy from officials that could protect economies from the coronavirus.
For the Euro, investors are closely watching the possibility of further easing from the European Central Bank (ECB). EU officials will also be watched for possible fiscal stimulus.
With the Federal Reserve running out of room to ease monetary policy, US Dollar investors are turning attention to the US government.
If the US ramps up fiscal stimulus, the US Dollar will be even more appealing as a safe haven and the Euro to US Dollar (EUR/USD) exchange rate will be in for fresh weakness.