Euro to US Dollar Exchange Rate Advances as Investors Close Short Positions on Euro
While a brief boost in demand for the US Dollar (USD) knocked the Euro to US Dollar (EUR/USD) exchange rate last week, this week has seen the pair recover again as investors firm on the Euro ahead of the end of the year.
Last week saw EUR/USD slide from 1.1120 to 1.1077, and while movement was mixed earlier this week the Euro (EUR) has been gaining in recent sessions.
EUR/USD has recovered all of last week’s losses today and has continued to climb. At the time of writing, EUR/USD was trending closer to the level of 1.1150.
The movement has been largely due to markets adjusting positions in the Euro before the end of the year, amid speculation that the Eurozone economy could strengthen next year.
Euro (EUR) Exchange Rates Benefit as Investors Close Short Positions
For much of 2019, investors sold the Euro amid lasting weakness in the Eurozone’s economic activity.
However, recent Eurozone data has begun to show some signs of recovery, boosting hopes that the bloc’s economy will see stronger performance in 2020.
Markets continue to digest the possibility of 2019’s weakness coming to end, leading investors to sell short positions on the Euro before the end of the year.
According to Ulrich Leuchtmann, Analyst at Commerzbank:
‘What I’m seeing here, it’s mainly some Euro strength,
This very negative Euro sentiment has prevailed over 2019 and has run out of steam … coming to this period of low liquidity, more people are more inclined to remove those short positions,’
US Dollar (USD) Exchange Rates Slip amid Lingering Federal Reserve Uncertainty
This week’s US economic calendar has been fairly busy despite markets being closed to observe the festive holiday season, but the data has generally not been enough to boost the US Dollar.
While last week’s US growth data was solid and PCE inflation stats beat forecasts, this week’s data has been comparatively disappointing.
Monday’s US durable goods orders results unexpectedly contracted at -2.0% rather than growing at the expected 1.5%.
Due to lingering signs of weakness in some major US ecostats, speculation that the Federal Reserve could ease US monetary policy at some point next year has persisted.
According to Toshinobu Chiba, Chief Portfolio Manager for Fixed Income at Nissay Asset Management:
‘The overnight gains in the Dollar were partly erased by dipping Treasury yields after the seven-year note auction, US-China trade optimism has put a solid floor under the Dollar,
In any case, I don’t expect any large moves either way in markets today as trading remains subdued due to the holiday week.’
Euro to US Dollar (EUR/USD) Exchange Rate Awaits Data for Central Bank Outlooks
Markets are speculating that the Eurozone economy could see a recovery in 2020, and speculation persists that the Federal Reserve will struggle to take a more hawkish stance on US monetary policy.
As a result, Euro and US Dollar investors will remain focused on data as 2019 draws to an end next week.
Monday will see the publication of Germany’s November retail sales results on Monday, as well as US wholesale inventories and Chicago PMI stats.
Later in the week, more influential data will drive EUR/USD in the first sessions of 2020.
Final December manufacturing PMIs from throughout the Eurozone will come in on Thursday, followed by US manufacturing data on Friday.
If these stats surprise investors, or there are any notable US-China trade developments, the Euro to US Dollar (EUR/USD) exchange rate could see shifts in movement next week.