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Recession Fears Lighten as Euro to US Dollar Exchange Rate Investors Await Federal Reserve News

US Federal Reserve Bank

Euro to US Dollar Exchange Rate Steadies as Investors Speculate Fiscal Stimulus

Despite persisting concerns that both Germany and the US could be headed towards recession, the Euro to US Dollar (EUR/USD) exchange rate steadied today. Investors became a little more optimistic amid speculation of fresh fiscal stimulus.

The steadier movement today followed a tumble last week, when EUR/USD opened the week at the level of 1.1200 and fell to close the week nearer the level of 1.1094.

On Friday before markets closed for the week, EUR/USD touched on a low of 1.1068 – which was the lowest level for the pair since the beginning of the month.

At the time of writing today, EUR/USD was buoyed slightly and trended closely to the level of 1.1100.

Euro (EUR) Exchange Rates Firm on Hopes for German Stimulus despite Recession Fears

Fears that Germany could fall into recession in the coming year worsened today, as Germany’s central bank also warned that the nation could be falling into recession. It follows weeks of poor German manufacturing data worsening the nation’s factory and trade outlooks.

Bundesbank predicted that Germany’s GDP growth rate could fall again in Q3, which would lead to a technical recession for the Eurozone’s biggest economy.

Still, despite the bank’s warnings, the Euro was a little sturdier. Markets were a little more optimistic following weekend comments from Germany’s finance minister, who indicated that the government could prepare fiscal stimulus to help Germany’s economy.

US Dollar (USD) Exchange Rates Remain Mixed as Investors Await Federal Reserve News

US Dollar movement was mixed last week, and that mixed movement may be set to continue. The US Dollar has been both supported and weakened by the rise in US-China trade fears and global growth slowdown fears.

While the US Dollar is a safe haven currency that is appealing in times of global uncertainty, fears of the US economy being hit by a trade war or even a US recession have limited the US Dollar’s demand.

The US Dollar gained against a weaker Euro last week, but as the Euro steadied today it was unable to push EUR/USD much lower.

Hopes for the US economy to avoid recession, as well as anticipation for upcoming Federal Reserve developments, are keeping the US Dollar buoyed however.

Euro to US Dollar (EUR/USD) Exchange Rate Investors Await Federal Reserve Developments

This week’s Eurozone and US economic calendars will be a little quieter this week, leaving investors to focus more on fiscal and monetary stimulus news as well as the latest recession speculation.

While there is no notable European Central Bank (ECB) news expected this week, ECB interest rate cut speculation may continue to rise if German recession fears persist. This would lead to fresh Euro weakness.

On the other hand, if German officials show more signs that German fiscal policy could be introduced to support Germany’s economy, the Euro could see a stronger recovery from last week’s tumble.

US Dollar investors, on the other hand, will be highly anticipating this week’s Federal Reserve news.

The Fed will publish its latest meeting minutes on Wednesday, but towards the end of the week a speech from Fed Chairman Jerome Powell and the upcoming Central Bank Symposium at Jackson Hole may be even more influential.

If the Fed minutes or Powell’s comments show any notable shift in the bank’s tone on US monetary policy, or any signs of giving in to pressure from US President Trump, the Euro to US Dollar (EUR/USD) exchange rate could see significant movement.