Euro US Dollar (EUR/USD) Exchange Rate Muted as Safe Haven Demand Eases
The Euro US Dollar (EUR/USD) exchange rate remained muted, leaving the pairing trading at around $1.0803.
The US Dollar remained under pressure as investors awaited the release of the Federal Reserve meeting minutes this evening.
While the ‘Greenback’ received some support on Tuesday after the Empire State manufacturing survey jumped to a nine month high, the pairing remained muted.
The index rose by 8 points to a better-than-expected 12.9 this month, after a disappointing second half of 2019.
Demand for safe haven currencies eased today, on signs that China was looking to ward off economic threats due to Covid-19.
China reported the lowest daily increase in infection cases since the end of January, and many perceived this to be an indication that the country’s containment efforts were working.
Commenting on this, currency strategist at Bank of Singapore, Moh Siong Sim noted:
‘It’s a tug of war between wait-and-worry and being relieved that the infection rate is slowing down.
‘The specific moves this morning are related to more policy help from China […] there’s some relief that more help is on the way and that is restoring some positivity to the market.’
Euro (EUR) Under Pressure as German Investor Morale Deteriorates
Meanwhile, during Tuesday’s session the single currency was dealt a further blow after more disappointing German data.
This saw the single currency plummet to a three-year low against the US Dollar, falling below $1.08 for the first time since April 2017.
The mood amongst German investors deteriorated more than expected as Covid-19 fears weighed on the economy.
A survey from ZEW revealed that monthly sentiment fell from January’s four year high of 26.7 to a worse-than-expected 8.7 in January.
Commenting on Tuesday’s data, ZEW President, Achim Wambach stated:
‘The feared negative effects of the coronavirus epidemic in China on world trade have been causing a considerable decline of the indicator of economic sentiment for Germany.
‘Expectations regarding the development of the export-intensive sectors of the economy have dropped particularly sharply.’
Euro US Dollar Outlook: Federal Reserve Minutes in Focus
Looking ahead, the US Dollar (USD) could edge higher against the Euro (EUR) following the release of the Federal Reserve meeting minutes this evening.
If Fed policymakers continue to reiterate and emphasize the strength of the US economy this could send the ‘Greenback’ higher.
Although, investors will be looking to see policymakers’ thoughts on risks posed by the spread of Covid-19.
Meanwhile, the single currency could extend its losses following the release of further German data.
If GfK reveals March’s consumer confidence in the bloc’s largest economy has fallen further than forecast, the Euro US Dollar (EUR/USD) exchange rate will slide.