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Year Best for Euro to US Dollar Exchange Rate as US Dollar Appeal Continues to Fade

Euro to US Dollar Exchange Rate Trending Near Best Levels Since 2019 

As the Eurozone outlook becomes more optimistic and the US outlook becomes less optimistic, the Euro to US Dollar (EUR/USD) exchange rate continues to climb. Even anticipation for tomorrow’s European Central Bank (ECB) decision is not enough to prevent Euro (EUR) gains. 

Following last week’s modest EUR/USD advance from 1.1247 to 1.1294, this week’s movement has been even more bullish. 

EUR/USD has already gained over a cent. In fact during today’s European session EUR/USD touched on a high of 1.1444. This was the best level for EUR/USD since the beginning of 2019, about a year and a half ago. 

At the time of writing EUR/USD trends just below those highs. Investors are unlikely to sell the Euro much before tomorrow though, as markets are optimistic about the Eurozone outlook and tomorrow’s ECB decision. 

Euro (EUR) Exchange Rates Benefit from Eurozone Recovery Hopes 

The Euro continues to see strong support and demand across the board this week. 

Despite a lack of fresh supportive Eurozone data today and yesterday’s data being mixed, the market’s Eurozone outlook remains optimistic. 

Eurozone data has generally indicated that the bloc is weathering the coronavirus pandemic better than some other major economies. On top of this, markets are optimistic over the EU and European Central Bank’s (ECB) measures to protect the bloc. 

These factors continue to support the Euro today and help it to climb further. According to Derek Halpenny, Strategist at MUFG: 

‘Optimism continues to build over the prospects for a more robust recovery in the Eurozone than in either the UK or the US, 

Our tracking of the demand for calls versus puts shows the skew in favour of calls at an unusually high level,’ 

US Dollar (USD) Exchange Rates Slump as Currency’s Appeals Fade 

Investors have increasingly little reason to buy the US Dollar, as the global coronavirus outlook improves but the US outlook continues to worsen. 

US data has been too mixed to offer the US Dollar much strength. On top of this, market demand for safe havens has been too limited amid rising coronavirus vaccine hopes. 

According to ITV Political Editor Robert Peston: 

‘Apparently the vaccine is generating the kind of antibody and T-cell (killer cell) response that the researchers would hope to see.’ 

The US Dollar has also been increasingly struggling to benefit from safe haven demand at all. As coronavirus cases surge in the US and the US economic outlook remains filled with uncertainties, investors are questioning the US Dollar’s appeal as a safe haven. 

Euro to US Dollar (EUR/USD) Exchange Rate Awaits European Central Bank (ECB) 

Thursday’s European session will see the European Central Bank (ECB) hold its July policy decision. 

In what could be the most influential Eurozone news of the week, the ECB is not expected to announce any changes to monetary policy. 

Instead, markets will be closely watching the bank for shifts in tone, particularly regarding the coronavirus pandemic. 

For example, if the bank is more optimistic about the Eurozone’s recovery chances, the Euro will be even more likely to advance further into its yearly best. 

On the other hand though, a surprisingly dovish ECB could knock the market’s recent rally and could even cause EUR/USD to fall again. 

US Dollar investors will be closely watching tomorrow’s US retail sales results from June. 

As the US retail sector is a key part in US economic performance, this data could influence the US coronavirus outlook and the Euro to US Dollar (EUR/USD) exchange rate.