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Euro US Dollar (EUR USD) Exchange Rate Holding Near 2-Year-Best but Gains Limited

EUR USD Exchange Rate Avoids Losses despite Highs 

While the Euro US Dollar (EUR USD) exchange rate’s advances have seemingly run out of steam for now, the pair is avoiding major losses as well. The Euro (EUR) remains appealing due to broad weakness in the US Dollar (USD). 

Over the past week, EUR/USD continued its bullish run, finally breaking above the key level of 1.20. 

Last week saw EUR/USD rise from 1.1965 to 1.2122, and this week so far the pair has continued to hover above the level of 1.21. 

While EUR/USD has been unable to hold last week’s 2-year-best of 1.2174, the pair remains close to those levels, sustaining last week’s impressive gains.  

The US Dollar’s rebound attempts lack drive. If coronavirus recovery hopes continue to rise, the Euro to US Dollar exchange rate could continue to see strong demand. 

Euro (EUR) Exchange Rates Buoyant despite Underwhelming Eurozone Growth Data 

The Euro continues to benefit from weakness in its rival the US Dollar.  

This is due partially to expectations that the Eurozone economy is weathering the coronavirus pandemic better than the US is. This sentiment persists, even amid speculation that Germany could tighten coronavirus restrictions soon. 

Today’s Q3 Eurozone growth rate stats had little impact on the Euro either. 

While Eurozone growth was a little disappointing, ZEW’s German and Eurozone economic sentiment stats reflected a jump in sentiment due to the past month’s coronavirus vaccine developments. 

US Dollar (USD) Exchange Rates Remain Unappealing on Risk-Sentiment, US Outlook 

The US Dollar has seen significant selling in recent weeks. Rising coronavirus recovery hopes, combined with a surge in US coronavirus infections and underwhelming US data, have kept the US Dollar unappealing. 

Even as the US Dollar selloff has paused in recent sessions, it has been unable to rebound much from its worst levels. 

Still, some analysts speculate the US Dollar may not have much further to fall, at least for the immediate outlook. According to Ron Simpson, Managing Director of Global Currency Analysis at Action Economics: 

‘Any good news we had on the vaccines last week has been fully priced in 

So I don’t think there’s anymore vaccine upside for equities. If equities remain under pressure, we’re going to see the dollar hold its own in the short term 

Hawkish European Central Bank (ECB) Could Boost EUR USD Exchange Rate 

For the time being, analysts predict that investors won’t have much reason to sell the Euro to US Dollar exchange rate lower again. 

The Euro remains comparatively appealing due to the Eurozone’s comparatively more optimistic outlook. 

Tomorrow’s German trade balance and US wholesale inventories stats are unlikely to change that. 

The next big focus for Euro and US Dollar investors will be Thursday’s European Central Bank (ECB) policy decision. 

If the ECB takes a more hawkish tone on coronavirus vaccine hopes, the Euro could see even stronger performance.  

On the other hand, concerns over the Eurozone’s current coronavirus situations could make the bank more dovish, which could pressure EUR/USD instead. 

The US Dollar will continue to be driven by global and US coronavirus developments. The Euro US Dollar (EUR/USD) exchange rate could be driven by Brexit developments as well, as this could impact the Eurozone economy.