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Euro US Dollar (EUR/USD) Exchange Rate Rises, US Dollar Sinks on Rising Fed Rate Cut Fears

Euro US Dollar currency forecast

EUR/USD Exchange Rate Soars as Coronavirus Fears Weigh on ‘Greenback’

The Euro US Dollar (EUR/USD) exchange rate rose by 1% this morning, with the pairing currently trading around $1.139. Today saw markets panic over the global coronavirus outbreak which has sent stocks and oil prices plummeting.

Neil Wilson, an analyst at Markets.com, commented:

‘There’s a risk of losses in oil positions needing to be covered by selling down elsewhere – we’re in a vicious circle … We don’t know even know what kind of impact the coronavirus will have on the economy yet bond and equity markets are screaming recession.’

The Euro (EUR) benefited from today’s release of Germany’s industrial production report for January, which beat forecasts and rose from -2.2% to 3% and signalled signs of the Eurozone’s largest economy’s recovery pre-coronavirus.

Carsten Brzeski, Chief Economist, Eurozone, at ING, was downbeat in his analysis:

‘At face value, this morning’s data is encouraging, adding evidence to a bottoming out of the German manufacturing sector. However, Covid-19 has changed everything. Being fully-integrated and dependent on the global economy, Germany will feel the impact of the unprecedented combination of supply-side and demand-side shocks. ‘

The EUR/USD exchange rate has benefited from a sell-off of the US Dollar as markets continue to bet on the Federal Reserve cutting its interest rates by a further 75 basis points later this month.

US Dollar (USD) Exchange Rate Falls as Fed Rate Cut Odds Rise

The US Dollar (USD) weakened after the number of those infected by COVID-19 in the US is expected to double within the next 48 hours. US President Donald Trump is also preparing to address the virus’ impact on the American economy.

With odds now rising to around an 84% chance that the Federal Reserve could cut its interest rates as early as 17-18 March, the US Dollar has suffered against many of its peers this morning.

Michael Gapen, the Head of US Economics Research at Barclays commented:

‘The likelihood of getting to zero is higher than the risk of a recession. There is probably a low risk of a recession, a 1 in 4 maybe at the most.’

As a result, market appetite for the US Dollar has remained limited at the beginning of this week, with ‘Greenback’ investors now focusing on global economic developments amid the ongoing coronavirus pandemic.

EUR/USD Outlook: Could the US Dollar Rise on Safe-Haven Demand?

Euro (EUR) investors will be looking ahead to tomorrow’s release of the Eurozone’s final growth report for the fourth quarter. Any signs of improvement would benefit the EUR/USD exchange rate.

However, with coronavirus developments threatening to throw the global economy into recession territory, we could see the single currency begin to struggle as the Eurozone’s economic outlook continues to darken.

US Dollar (USD) investors will continue to eye the Federal Reserve for any further hints of a rate cut. However, if the global coronavirus panic escalates we could see USD claw back some of its losses as investors seek out its safe-haven.