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Euro to US Dollar Exchange Rate Tests Weekly Highs as Safe Haven Demand Fades

Euro to US Dollar Exchange Rate Benefits from Softer Than Expected US-China Trade Action

Despite a lack of particularly impressive Eurozone data this week, the Euro to US Dollar (EUR/USD) exchange rate has advanced over half a cent this week and could climb further if investors continue to sell safe haven currencies.

EUR/USD opened this week at the level of 1.1629 and has easily advanced due to US Dollar (USD) weakness. On Tuesday, EUR/USD hit a high of 1.1716 – which was near last week’s September high of 1.1719.

At the time of writing on Wednesday, EUR/USD trended in the region of 1.1680.

As the latest escalations in US-China trade tensions were not as severe as many economists expected, market demand for safe haven currencies has slipped and investors have sold the US Dollar from its best levels.

The Euro (EUR), on the other hand, has been benefitting from US Dollar weakness. This week’s Eurozone data has also been decent enough to help the shared currency to hold its ground.

Euro (EUR) Exchange Rates Firm Thanks to Sturdy Eurozone Datasets

While the Euro outlook hasn’t changed much this week so far, the shared currency has still been supported thanks to fairly solid Eurozone ecostats, as well as the weakness of its rival the US Dollar.

Wednesday saw the publication of the Eurozone’s July current account and construction output reports, which both came in well above market expectations.

The Eurozone’s current account surplus was forecast to have slipped from €28.5b to €22.4b. However, the previous figure was revised higher, to €28.8b, while the July figure came in with a surprisingly wide surplus of €31.9b.

Eurozone construction output was also surprisingly impressive year-on-year. The previous figure was revised higher from 2.6% to 3.0%, and the July figure rose to 2.6% rather than the predicted 1.7%.

As the Euro is the US Dollar’s biggest currency rival though, the biggest reason for Euro strength this week so far has been US Dollar weakness.

US Dollar (USD) Exchange Rates Sold as Safe Haven Demand Fades

The US and China both ramped up trade action against one another this week, introducing new rounds of trade tariffs on imports of goods from the other nation.

US President Donald Trump confirmed he would put 10% tariffs on around €200b worth of Chinese products. Meanwhile, China announced their own tariffs on around €60b of US products in retaliation.

However, while this news would typically make safe haven currencies like the US Dollar more appealing the latest escalations in trade actions weren’t actually as severe as analysts expected.

The US was expected to implement 25% tariffs, but those have been delayed until later in the year. China’s action is also not as severe as plans China hinted at in recent months.

As a result, trade war fears actually lightened somewhat. Demand for safe haven currencies faded and investors were more eager to sell the US Dollar from its best levels.

Euro to US Dollar Exchange Rate Could Extend Gains on Eurozone Data

While recent EUR/USD movement has been caused by risk-sentiment, more influential data will be published in the coming sessions.

Much of the Euro to US Dollar (EUR/USD) exchange rate’s gains this week have been due to US Dollar weakness, so if upcoming Eurozone data impresses investors the pair could see even further gains.

The week’s most notable Eurozone data will be published in the coming days, including September consumer confidence survey data on Thursday and Markit’s PMI projections on Friday.

These will give investors a better idea of how the Eurozone economy is currently performing and may indicate how badly the Eurozone could be impacted by US-EU trade uncertainties.

The Eurozone PMIs on Friday, especially, could be the most notable dataset of the week if they surprise investors.

Stronger Eurozone PMI stats could cause EUR/USD gains, while weaker data could cause the Euro to shed some ground against the US currency.

US existing home sales data from August on Thursday, and Markit’s US PMI projections for September on Friday, could also influence the Euro to US Dollar (EUR/USD) exchange rate outlook.