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Euro to US Dollar Exchange Rate Climbs to 3-Week-Best as Safe Haven Appetite Fades

A US Dollar bill.

Euro to US Dollar Exchange Rate Advances despite Lack of Eurozone Support

This week’s data has done little to offset concerns that Germany’s economy fell into recession in Q3, but despite this the Euro to US Dollar (EUR/USD) exchange rate is on track to sustain gains this week.

Since opening this week at the level of 1.0979, EUR/USD saw mixed movement in the first half of the week as German data continued to disappoint, before the pair started to climb more solidly following the Federal Reserve’s meeting minutes on Wednesday.

At the time of writing on Friday afternoon, EUR/USD trended near a 3-week-best level of 1.1058.

EUR/USD has now recovered much of the losses seen in late-September, due largely to fresh weakness in the US Dollar (USD).

Euro (EUR) Exchange Rates Climbs on Rival Weakness amid Lack of Domestic Support

Most of the past week’s Eurozone data continued a disappointing trend, giving markets little fresh hope that Germany would avoid a Q3 recession. Despite this though, the Euro (EUR) has seen stronger performance towards the end of the week.

The Euro’s strength has been largely due to weakness in rival currencies, especially the US Dollar.

The US Dollar is the Euro’s biggest currency rival and the two currencies often see a negative correlation. The US Dollar’s weakness this week has been one of the primary causes of Euro gains.

On top of this though, the Euro has also benefitted from fresh speculation that the European Central Bank (ECB) may be hesitant to avoid taking a more dovish stance on Eurozone monetary policy due to split views among officials.

News that ECB President Mario Draghi had ignored advice against reintroducing certain aspects of quantitative easing (QE) boosted bets that the ECB was not as dovish as expected, which bolstered the Euro.

US Dollar (USD) Exchange Rates Unappealing as Safe Haven Demand Lightens

The US Dollar has seen weaker performance since the middle of the week, when the Federal Reserve’s latest meeting minutes were published and showed a surprising split in tone among officials.

While the bank cut US interest rates by a quarter-point last month, the minutes revealed that some officials wanted no rate cut, while some others wanted an aggressive half-point rate cut in order to help stave off a potential US recession.

Speculation of a more dovish Fed, combined with weaker US data, left the US Dollar under pressure.

On top of this, the safe haven US Dollar was even weaker towards the end of the week amid rising hopes that US-China trade negotiations were going well. The trade hopes bolstered market demand for slightly riskier currencies correlated to trade.

Euro to US Dollar (EUR/USD) Exchange Rate Could Slide if US Data Impresses

The Euro to US Dollar (EUR/USD) exchange rate is gaining on US Dollar weakness today, meaning that if demand for the US currency improves it could lead to weaker EUR/USD movement in the coming week.

Key US data to keep an eye out for in the coming week includes September retail sales stats on Wednesday and production figures on Thursday.

If these reports beat expectations, speculation of a more dovish Federal Reserve could soften and the US Dollar could strengthen.

The Euro, on the other hand, may react to major upcoming Eurozone data including industrial production on Monday, economic sentiment on Tuesday, and inflation stats on Wednesday.

If these or the week’s German stats impress investors, they could offset Eurozone growth concerns slightly and offer some sturdier support to the Euro to US Dollar (EUR/USD) exchange rate.