Homepage » News » EUR/USD » Euro US Dollar Exchange Rate Edges Higher as ‘Greenback’ Suffers from Fed Rate Cut Fears

Euro US Dollar Exchange Rate Edges Higher as ‘Greenback’ Suffers from Fed Rate Cut Fears

US Dollar bills

EUR/USD Exchange Rate Rises, Coronavirus Fears Weaken US Dollar

The Euro US Dollar (EUR/USD) exchange rate edged higher by 0.3% today, with the pairing currently trading around $1.136 as the ‘Greenback’ continues to suffer from a loss in US bond yields and rising concerns over a possible rate cut from the Federal Reserve.

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

‘The likelihood of getting a zero [percent interest rate cut from the Fed] is higher than the risk of a recession’. [There’s] probably a low risk of a recession, a 1 in 4 maybe at the most’.’

The US Dollar (USD) has remained subdued against the Euro (EUR) due to rising fears over the global coronavirus outbreak having a negative impact on the US economy going forward.

Today’s publication of the US NFIB’s Business Optimism Index for February edged higher from 104.3 to 104.5.

William Dunkelberg, the Chief Economist at NFIB, commented on the report:

‘February was another historically strong month for the small business economy, but it’s worth noting that nearly all of the survey’s responses were collected prior to the recent escalation of the coronavirus outbreak and the Federal Reserve rate cut. Business is good, but the coronavirus outbreak remains the big unknown.’

EUR/USD Exchange Rate Improves as Eurozone’s Growth Report Rises

The Euro (EUR) improved against the US Dollar (USD) following this morning’s stronger-than-expected Eurozone growth figure, which rose from 0.9% to 1% year-on-year.

Bert Colijn, a Senior Economist for the Eurozone at ING Bank, was downbeat in his analysis, commenting:

‘While some green shoots were apparent on the back of calmer political environment around trade, domestic demand slowed while net exports improved only slightly. Current Covid-19 developments obviously trump the green shoots and have likely tipped GDP growth into a decline in the first quarter.’

The EUR/USD exchange rate is likely to show increasing volatility, however, after the Italy-wide quarantine to prevent the spread of Covid-19.

As this will increase the odds of a rate cut from the European Central Bank (ECB), it’s likely that we could see the single currency’s gains begin to fall in the coming days.

EUR/USD Outlook: Coronavirus Developments in Spotlight

US Dollar (USD) investors will be looking ahead to tomorrow’s release of the US Consumer Price Index for February. Any signs of improvement in US inflation could boost the ‘Greenback’ as America’s economic outlook brightens.

However, with the coronavirus continuing to dominate USD investors’ attention, we could see the USD/EUR slip further on heightened odds of a rate cut amid fears of a global economic recession.

Euro (EUR) traders will be keeping a close eye on coronavirus developments within Europe, with any further signs of escalation proving EUR-negative.