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Euro US Dollar (EUR/USD) Exchange Rate Steady, US Federal Reserve Rate Cut Odds Rise

EUR/USD Exchange Rate Rangebound, US Economic Outlook Dims for 2020

The Euro US Dollar (EUR/USD) exchange rate held steady today, with the pairing currently trading around $1.085 after the ‘Greenback’s gains slipped after Loretta Mester, the President of the Federal Reserve Bank of Cleveland, commented on the risk of the coronavirus to the US economy.

Economist at Oxford Economics Gregory Daco said that the Federal Reserve could move quickly to avoid an economic setback, saying that if markets continued to struggle, the US central bank could cut as early as next month.

Daco said:

‘Watching and waiting at this stage is a risky proposition. Not reacting to financial market signals can worsen the economic impact of the virus.’

US Dollar (USD) investors will be awaiting today’s release of the US housing data. Any signs of improvement in December’s house price index providing a glimmer of hope for the American economy.

Today also will also see Richard Clarida, Vice Chairman of the Board of Governors of the Federal Reserve, deliver a speech. If Clarida is dovish about the US economy, however, we could see USD sink on rising rate cut fears.

EUR/USD Exchange Rate Steady, German Growth Remains Stagnant in Fourth Quarter

The Euro (EUR) remained unmoved after this morning’s release of the final quarterly German GDP figure for the fourth quarter, which held steady at 0%, while the year-on-year figure rose by 0.3%.

Claus Vistesen, Chief Eurozone Economist at Pantheon Macroeconomics, was downbeat in his analysis, however, saying:

‘The slowdown in manufacturing output finally hit home in the second half of last year, stinging investment. The German economy is not out of the woods.’

EUR traders are becoming increasingly concerned over what they see as a possible drop in German industrial output in the first quarter, as current figures do not show the full impact of China’s coronavirus on the global economy at the beginning of this year.

Paul Meggyesi, an analyst at JP Morgan, commented:

‘In the past few weeks we have argued how the Eurozone’s fragile growth outlook and capital flow structure has made it an inferior funding safe haven currency.’

EUR/USD Outlook: Could an Improving US Housing Sector Boost the ‘Greenback’?

US Dollar (USD) investors will be looking ahead to Wednesday’s release of January’s US New Home Sales report, which is expected to rise from 0.694 million to 0.71 million. As a result, we could see the USD begin to edge higher against the single currency.

Euro (EUR) traders will be looking ahead to tomorrow’s release of the French consumer confidence gauge for February. Any signs of an uptick in the Eurozone’s second-largest economy could provide some uplift for the EUR/USD exchange rate.