Euro to US Dollar Exchange Rate Rising Again as Market’s Safe Haven Run Short-Lived
While concerns of a ‘second wave’ of coronavirus infections persist, the Euro to US Dollar (EUR/USD) exchange rate has been little-hit by safe haven demand. Safe haven rallies have been too short-lived to really boost the US Dollar (USD).
This is making it easier for EUR/USD to climb as the Euro (EUR) benefits from EU coronavirus optimism. Since markets opened this week, EUR/USD has been climbing from the level of 1.1178 and currently trends in the region of 1.1226.
Already, EUR/USD has recovered some of last week’s losses. Last week saw EUR/USD briefly climb, but ultimately tumble from the level of 1.1256 to 1.1178 throughout the week.
Looking ahead, Euro investors highly anticipate tomorrow’s Eurozone PMI projections. US Dollar investors are waiting for more global shifts in coronavirus sentiment.
Euro (EUR) Exchange Rates Resilient on Hopes for EU’s Coronavirus Measures
The Eurozone has been perceived as handling the coronavirus pandemic relatively well. This is especially in comparison with other major economies like the UK and US, which have had their coronavirus methods criticised.
Even though the EU’s latest fiscal policy to handle the virus was delayed last week, analysts remain overall optimistic about the chances that policy will be agreed.
According to Francesco Pesole, FX Strategist at ING, investors are simply more optimistic about the Eurozone’s coronavirus outlook:
‘Markets are way more relaxed about the Eurozone prospects even though they know it’s not going to be an easy ride in these negotiations,’
On top of this, the latest Eurozone data has been coming in slightly better than forecast. Eurozone consumer confidence beat expectations today.
US Dollar (USD) Exchange Rates Struggle as Safe Haven Demand Limited
The US Dollar saw a period of stronger demand last week. As the US Dollar is traditionally a safe haven currency, rising fears of a ‘second wave’ of coronavirus infections has bolstered USD support slightly.
However, due to concerns over the coronavirus pandemic’s impact on the US economy, as well as market optimism over economic rebounds in the Eurozone, the US Dollar has struggled to hold its ground.
Today’s US existing home sales results came in worse than forecast. The print recorded a –9.7% contraction in May, rather than the expected –3%.
US existing home sales crashed in May,falling to the lowest level since 2012 — 3.91 million units (seasonally adjusted annual rate). But a rebound is near as the economy reopens, predicts the economist at Nat'l Assoc of Realtors, which publishes the data: https://t.co/4SAk18wC7M pic.twitter.com/EgN9zUDxeX
— James Picerno (@jpicerno) June 22, 2020
Though some analysts predict a rebound may be near, concerns persist that the US economy will continue to struggle with the virus.
Euro to US Dollar (EUR/USD) Exchange Rate Could Fall if Eurozone PMIs Disappoint
For now, optimism over the Eurozone’s coronavirus situation is keeping the Euro to US Dollar (EUR/USD) exchange rate afloat.
However, this also means that if the Eurozone outlook gets a gloomy hit, the Euro to US Dollar exchange rate’s appeal could weaken as well.
Tomorrow will see the publication of the Eurozone’s June PMI projections. They will give investors a better idea of how the Eurozone economy is performing amid the most recent stages of the pandemic.
If Eurozone data disappoints, or EU fiscal policy plans are perceived as hitting a roadblock, some of the Euro’s recent strength could crumble.
In fact, a weaker Eurozone outlook would boost the US Dollar’s appeal.
On the other hand though, if the US economic outlook remains concerning, the US Dollar’s appeal as a safe haven will also be limited.
Tomorrow’s US PMI projections from Markit, as well as potential coronavirus developments, could also influence the Euro to US Dollar (EUR/USD) exchange rate.
