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Euro US Dollar (EUR/USD) Exchange Rate Rises as US Senate Agree on $2tn Stimulus Package

EUR/USD Exchange Rate Edges Higher as Risk Sentiment Improves

The Euro US Dollar (EUR/USD) exchange rate rose by 0.1% today after US Senate leaders struck a deal with the Trump administration to go ahead with a nearly $2 trillion stimulus package to strengthen the American economy throughout the coronavirus pandemic. The pairing is currently trading around $1.082.

The US Dollar (USD) fell for its third session in a row today, with the new US fiscal deal providing a rebound for markets and encouraging risk sentiment as fears of ‘Greenback’ shortage recede.

Mark Haefele, the chief investment officer UBS AG, said the market rebound was owed to the Fed’s decision to ‘expand monetary policy measures to help ease liquidity gaps and credit strains.’ Haefele added:

‘The Fed’s decision to effectively remove any limits on quantitative easing and establish facilities for the purchase of corporate bonds in the primary and secondary markets, along with support for municipal lenders, represents a significant escalation of its monetary policy support.’

USD has also come under pressure from worries that the US could become an epicentre of a Covid-19 outbreak following a sharp rise in cases this week.

EUR/USD Exchange Rate Edges Higher Despite Poor German Business Morale

The Euro (EUR) has continued to tick higher in spite of today’s release of Germany’s IFO Business Climate report for March, which fell to a worse-than-expected 86.1 – its worst since 2009.

IFO President Clemens Fuest commented:

‘This is the steepest fall ever recorded since German reunification and the lowest value since July 2009… The German economy is in shock.’

While the Euro (EUR) is struggling from fears of the Eurozone’s economy shrinking in the first quarter, the easing number of Covid-19 cases in Italy is providing some light at the end of the tunnel for Europe’s coronavirus crisis.

Analysts at Mizuho commented:

‘Risk assets bounced yesterday in the aftermath of positive noises for the U.S. fiscal deal’s progress and the Fed’s commitment to buy unlimited U.S. Treasuries and MBS.’

‘Further headlines around Germany’s renewed political commitment to spend, the likelihood of agreement on ESM borrowing, and the tentative signs that Italy’s death rate now appears to be levelling off gave them further support.’

The single currency is also benefiting from the weakness in its largest competitor, the US Dollar, as investors continue to flock the American currency’s safe-haven for riskier assets like the Australian Dollar and New Zealand Dollar.

EUR/USD Outlook: US Dollar Could Rise on Dampening Risk Sentiment

The Euro (EUR) is likely to remain in a state of volatility as the Euro-area enters another week of lockdown to prevent the spread of the coronavirus. With the Eurozone’s largest economy, Germany, continuing to teeter on recession we could see the EUR/USD exchange rate begin to dip.

Meanwhile, the US Dollar (USD) will likely regain its losses as uncertainty over the global economy and Covid-19 are set to continue, bolstering market demand for the safe-haven ‘Greenback’.