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Euro to US Dollar Exchange Rate Floundering as Safe Haven Demand Rises

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Euro to US Dollar Exchange Rate Struggling to Advance as Coronavirus Cases Worsen 

A rising number of coronavirus cases is causing safe haven demand to rise, and the Euro to US Dollar (EUR/USD) exchange rate is being kept under pressure as a result. The Euro (EUR) also lacks the drive to sustain further gains. 

Since opening this week at the level of 1.1256, EUR/USD has seen mixed movement. EUR/USD briefly jumped higher to above the key level of 1.13. However, since then the pair has been floundering nearer the week’s opening levels again. 

At the time of writing on Thursday, EUR/USD is trending just below the week’s opening levels. 

Investors are buying the safe haven US Dollar (USD) due to worsening market uncertainty. However, its gains are limited due to US economic fears and this is limiting the pair’s losses. 

Euro (EUR) Exchange Rates Struggling for Ground amid Lack of Drive 

Much of the Euro’s strength lately has been due to rival weakness. Markets are optimistic about the EU and ECB handling of the coronavirus. As a result, the Euro outlook has been fairly optimistic overall. 

The US Dollar is the Euro’s biggest rival. As a result of a slightly recovering US Dollar this week, the Euro has been under more pressure. 

This week’s Eurozone data has done little to impact the Euro outlook either. Eurozone inflation largely fell in line of expectations. 

Markets are already impressed with the ECB’s Eurozone reflation policies. As a result, inflation is not a large concern for investors. The Euro’s mixed performance has had more to do with the US Dollar. 

US Dollar (USD) Exchange Rates Benefitting from Rising Safe Haven Demand 

The US Dollar is traditionally a safe haven currency. It typically benefits in times of market uncertainty. As a result, it has been rebounding slightly from recent lows as a result of fresh coronavirus pandemic fears. 

Concerns of a ‘second wave’ for the coronavirus pandemic have hit headlines this week. It is largely due to jumps in infections in the US and China. 

It’s because of the pandemic’s impact in the US though, that the US Dollar has not benefitted more from market safe haven demand. 

While the US Dollar is a safe haven, investors fear the US economy will keep being hit by the coronavirus going forward. According to Yohay Elam, Analyst at FXStreet: 

‘The worrying news from Texas, Florida – and also Beijing which is suffering an outbreak – has outweighed optimism from robust US retail sales figures published earlier this week. Reopening quickly may have helped the economy but it may hit it back.’ 

Euro to US Dollar (EUR/USD) Exchange Rate to Keep Watch for Coronavirus Developments 

Investors are likely to keep watching the coronavirus pandemic closely in the coming sessions. 

The Euro is more appealing in times of US Dollar weakness. As a result, if the US Dollar benefits more strongly from rising safe haven demand, EUR/USD could fall further. 

However, the US Dollar may remain weak instead. The US economic outlook is limited by coronavirus fears. 

Tomorrow will see the publication of German PPI data. Comments later in the day from Federal Reserve officials may also be influential. 

Overall though the Euro to US Dollar (EUR/USD) exchange rate is likely to avoid falling too far unless the Eurozone outlook takes a more negative shift.