Euro to US Dollar Exchange Rate Weakness Short-Lived
This morning saw the Euro to US Dollar (EUR/USD) exchange rate hit by a sudden boost in demand for the US Dollar (USD). As a traditional safe haven currency, USD is particularly popular in times of market uncertainty.
However, the US Dollar’s weakness was short-lived and the Euro (EUR) has generally continued its bullish movement.
EUR/USD surged almost two cents to the level of 1.1292 last week. After this morning’s brief slip to the level of 1.1246, EUR/USD has been climbing again and currently trends in the region of 1.1340.
While investors are buying the US Dollar ahead of tomorrow’s Federal Reserve news, the Euro remains too appealing for the US Dollar to sustain much of a recovery.
Euro (EUR) Exchange Rates Continue to Find Support in Data
The Euro has been one of the most appealing major currencies lately. Even as its rally runs out of steam, investors are hesitant to buy the US Dollar too much against it, as the Euro’s appeal persists.
Not only has the Euro been appealing as a US Dollar rival, it has also been gaining from the European Central Bank’s (ECB) monetary policy and the EU’s exit strategies for coronavirus quarantine.
Plus, while mixed, today’s Eurozone data has been fairly positive.
#Eurozone #GDP contraction of 3.6% q/q in Q1 2020 occurred as were sharp q/q declines in #consumer spending (4.7%), #investment (4.3%) & exports (4.2%). Imports fell lesser 3.6% q/q so net #trade negative. Government spending fell 0.4% q/q. Modest positive stocks contribution https://t.co/iKKRapyvqM
— Howard Archer (@HowardArcherUK) June 9, 2020
The data has indicated to some investors that the worst of Eurozone’s growth fears may be behind it, so long as the coronavirus situation continues to improve going forward.
US Dollar (USD) Exchange Rates Struggle to Hold Recovery Attempts
Fresh trade tensions between China and Australia led to a jump in market demand for safe havens today. As a result, the US Dollar saw something of a rebound after a week of notable losses.
However, its recovery attempt was short-lived. By the end of Tuesday’s session, the US Dollar was falling against the Euro once again.
Today’s US wholesale inventories data was a little weaker than forecast. Investors are also eagerly awaiting tomorrow’s Federal Reserve news.
According to Lars Sparreso Merklin from Danske Bank, EUR/USD may have even further to climb:
‘We revise our one-month and three-month forecast to 1.15 while lifting our six-month and twelve-month forecast to 1.11. This is a parallel shift upwards of six figures reflecting not only global reflation trends but also a one-off level from changed European tail risks. The key risk for our six-twelve month view will be how the Fed moves in the second half of 2020.’
Euro to US Dollar (EUR/USD) Exchange Rate Investors Await Federal Reserve Policy Decision
The Federal Reserve will hold its June monetary policy decision tomorrow. This is likely to be the biggest data of the week for Euro to US Dollar exchange rate investors.
The Fed is not expected to announce any major shifts to US monetary policy. However, any signs of a shift would be hugely influential.
For example, if the Fed indicates it could tighten monetary policy due to an economic rebound, USD is more likely to see sustained gains.
On the other hand though, if the Fed’s current tone persists, EUR/USD is likely to continue trending with an upside bias.
The Euro remains appealing as the US Dollar’s rival. Further optimism around the EU’s coronavirus exit plans would also boost the Euro to US Dollar exchange rate.