Euro US Dollar (EUR/USD) Exchange Rate Muted as Brent Oil Slumps to Lowest Level Since 1999
The Euro US Dollar (EUR/USD) exchange rate remained flat on Wednesday, leaving the pairing trading at around $1.0869.
The pairing was left muted today as oil prices recovered from yet another slump, which left demand for safe-haven currencies stronger despite markets beginning to stabilise.
While the ‘Greenback’ was flat against a basket of its rivals, the Dollar index was still up around 0.5% on the week.
Overnight, oil prices slumped once again as Brent plummeted to its lowest level since 1999.
Monday saw US crude oil futures turn negative for the first time in history as traders were desperate to get rid of oil.
In a note to clients, Commerzbank senior FX analyst Thu Lan Nguyen wrote:
‘The recent distortions on the oil market are less likely to be the cause but instead the trigger for the market to reveal its worst fears regarding the economic extent of the corona crisis.
‘The fact that despite the renewed collapse of the oil price the Canadian dollar’s losses are limited is unlikely to be seen as an entirely positive development domestically.’
Euro (EUR) Flat Ahead of EU Leader’s Summit
The Euro was left flat today ahead of Thursday’s EU leader’s summit. Reports suggest the divisions between EU finance ministers remain despite reaching an agreement on a stimulus package.
One key sticking point is whether or not joint coronavirus bonds will be used to finance the ‘emergency fund’.
However, on Tuesday it was reported that Italy’s Prime Minister Conte is prepared to accept a French and Spanish compromise which would mean there would not be further treaty changes.
Meanwhile, Eurozone government debt will jump this year due to the coronavirus pandemic. While analysts have said another debt crisis is unlikely, the large differences between countries within the bloc will emerge and likely test their unity.
The International Monetary Fund (IMF) said debt in the bloc will increase by more than 13% of GDP. This likely dampened EUR sentiment.
Commenting on this, Saxo Bank’s economist Christopher Dembik said:
‘As the ECB is literally cleaning up all the secondary market […] the risk of a sovereign debt crisis is close to zero.’
Euro US Dollar Outlook: Consumer Confidence and Jobless Claims in Focus
Looking ahead to this afternoon, the Euro (EUR) could slide against the US Dollar (USD) following the release of Eurozone confidence data.
If April’s flash consumer confidence slumps near analysts’ estimates, it would take the index to its lowest level since 2013 and dampen EUR sentiment.
Meanwhile, traders will be looking to Thursday’s US jobless claims to see if the country continues to report high levels of Americans out of work.
If initial and continuing jobless claims rise higher than expected, risk sentiment will suffer and traders will flock to the safety of the Dollar, leaving the Euro US Dollar (EUR/USD) exchange rate to edge lower.
