EUR/USD Exchange Rate Maintains Downtrend Despite ECB Intervention
The Euro to US Dollar (EUR/USD) exchange rate is back on the defensive today as the optimism surrounding the European Central Bank’s (ECB) new stimulus package begins to fade.
At the time of writing the EUR/USD exchange rate is trading at around $1.0754, down roughly 1.8% from today’s opening levels and striking a new two-year low in the process.
ECB’s Massive Stimulus Announcement Fails to Prop-Up the Euro (EUR)
The Euro (EUR) is facing further losses against the US Dollar (USD) today after the pairing’s failed to sustain its rebound following the ECB’s announcement of a huge new stimulus package.
Following an emergency meeting on Wednesday the ECB announced it would be unleashing a massive wave of quantitative easing worth a whopping €750bn as it attempts to limit the economic fallout from the coronavirus crisis.
With most of Europe in lockdown in an effort to limit the spread of the disease, economic activity in the EU has effectively ground to a halt, increasing the pressure on the Eurozone’s already fragile economy.
Extraordinary times require extraordinary action. There are no limits to our commitment to the euro. We are determined to use the full potential of our tools, within our mandate. https://t.co/RhxuVYPeVR
— Christine Lagarde (@Lagarde) March 18, 2020
A statement from the ECB’s governing council read:
‘The Governing Council will do everything necessary within its mandate. The Governing Council is fully prepared to increase the size of its asset purchase programmes and adjust their composition, by as much as necessary and for as long as needed.’
EUR investors were quick to note the ECB’s also made mention of abandoning its ‘self-imposed limits’ clearing hinting that the ECB’s Pandemic Emergency Purchase Programme (PEPP) could be expanded even further.
Economists welcomed the move but warned that ultimately the economic impact of the coronavirus will be depend on how well EU governments are able to cope with the crisis.
Carsten Brzeski, chief economist at ING Germany, said:
‘In the short run, financial markets and the economy will still depend on how the pandemic and with it the preventive government measures to tackle it evolve. This will be the main determinant for the depth of the recession.’
US Dollar (USD) Continues to Dominate in Coronavirus Directed Trade
Meanwhile, the US Dollar (USD) is on another tear this morning as investors continue to pile into the currency in light of the ongoing uncertainty surrounding the coronavirus crisis.
Investors have flocked to USD in recent days amidst spiraling demand for the world’s reserve currency, as traders and business alike seek to improve their liquidity.
This is spurring fears of a possible USD shortage, which in turn is exacerbating demand as propelling the US Dollar rapidly higher, in spite of the outlook for the US economy looking equally dicey due to the coronavirus outbreak.
EUR/USD Forecast: Coronavirus Crisis Thrusts US Jobless Claims into the Spotlight
While normally viewed as low tier data and largely ignored by the market at large, we expect USD investors to be paying close attention to this week’s Initial Jobless Claims.
Traders will be looking to see if the coronavirus crisis is already resulting in job losses in the US and could help to cap the upside in the US Dollar following their release.
However, looking further ahead it seems extremely unlikely we will see any meaningful rebound in the Euro to US Dollar (EUR/USD) exchange rate anytime soon as the outbreak continues to weigh on market sentiment for the foresseable future.