Euro (EUR) Exchange Rate Steady as Doubts Rises Over ECB’s Next Move
The Euro US Dollar (EUR/USD) exchange rate held steady today as markets brace for the European Central Bank’s (ECB) interest rate decision. This left the pairing trading around $1.126.
‘The widespread notion in the market that a decisive ECB president needs to ‘surprise’ the market with even more than it expects, can no longer apply: first, the limits of what is possible are closer now than they were a few years back and second, the current crisis is different.’
‘Hence, we think an owl-led ECB is likely to resist turning rates more negative at this juncture.’
Euro (EUR) investors are jittery as Italy’s lockdown amid the global coronavirus epidemic threatens to push the bloc’s economy into recession. The Eurozone’s large manufacturing base is uniquely sensitive to supply chain disruption. Consequently, the outlook for bloc’s economic recovery also looks slim.
ECB President Christine Lagarde also warned that Covid-19 could initiate a financial crash equal to that seen in 2008.
The EUR/USD exchange rate could hold its position today with the ECB unlikely to take its interest rates into negative territory. Any signs of fiscal stimulus to boost the Eurozone’s economy could uplift for the single currency.
US Dollar (USD) Steady as US Coronavirus Fears Expected to ‘Get Worse’
The US Dollar (USD) struggled to gain on the Euro (EUR) as the US coronavirus outbreak intensifies. The death toll in America has now risen to 37.
Anthony Fauci, the Head of the National Institute of Allergy and Infectious Diseases (NIAID), also warned that ‘it’s going to get worse’.
The ‘Greenback’ failed to benefit from yesterday’s stronger-than-expected US inflation report.
The month-on-month figure rose by 0.1%, while the year-on-year gauge edged higher at 2.4%.
Senior US economist at Capital Economics at New York Michael Pearce said:
‘With core inflation stable, and headline inflation set to plummet, there is little in the inflation data to distract the Fed from its immediate goal of supporting the economy during the coming coronavirus hit.’
USD investors will be awaiting today’s US employment data.
Any signs of Marche’s initial jobless claims sinking below 216 thousand would boost the ‘Greenback’.
EUR/USD Outlook: US Consumer Sentiment in Focus
US Dollar (USD) investors will be waiting for tomorrow’s release of March’s US Michigan Consumer Sentiment Index.
As this is forecast to sink, we could see the USD/EUR exchange suffer.
Euro (EUR) traders will be awaiting tomorrow’s German harmonized inflation report for February. Any improvement in the Eurozone’s largest economy would prove EUR-positive.