EUR/USD Exchange Rate Rangebound as US Dollar Benefits from Safe-Haven Status
The Euro US Dollar (EUR/USD) exchange rate steadied today, leaving the pairing trading around $1.121.
The US Dollar (USD) remained rangebound against the single currency following the publication of the Chicago Fed National Activity Index figures for June.
These fell below the consensus 0.10 increase to -0.02.
As a measure of economic activity, this is causing some concern for ‘Greenback’ traders as the gauge still remains in the negative.
The US Dollar is, however, benefiting from its safe-haven status as tensions have increased in the Middle East.
This came following Friday’s footage of the Iranian military confronting a British navy vessel which Tehran said was ‘violating international maritime rules’.
USD investors are also relieved, seeing this recent benefit as likely tempering the Federal Reserve’s expected rate cut later this month.
EUR/USD Exchange Rate Flat as Italy’s Political Uncertainty Holds Back Euro
The Euro stabilised against the US Dollar as European currency traders are becoming increasingly jittery as the European Central Bank (ECB) appears poised to unveil fresh stimulus to the economy.
This follows last week’s Eurozone inflation figures which failed to meet the ECB’s target of 2%.
As the Eurozone’s economy is showing increasing indications of slowing down, analysts are forecasting a softening in the ECB’s monetary policy in the near-term.
Tensions between the EU and Italy are continuing to hold back the Euro’s gains.
Last week saw the Italian coalition government come close to a breakup, leaving Italy’s political situation hanging in a state of uncertainty.
Matteo Salvini, Italy’s Interior Minister, provided some relief, however, saying that he had faith in Italian Deputy Prime Minister Luigi Di Maio, adding ‘there won’t be a crisis’.
The UK’s Brexit situation is also weighing on confidence in the Euro, as the next British Prime Minister – who will be announced tomorrow – is likely to be Brexiter Boris Johnson.
This has further heightened concerns of the UK’s disorderly exit from the European Union.
EUR/USD Outlook: Geopolitical Developments in Spotlight
Euro traders will be looking ahead to the ECB’S Bank Lending Survey report tomorrow.
Any further signs of a struggling Eurozone economy could weaken the EUR/USD exchange rate.
USD investors, meanwhile, will be awaiting tomorrow’s release of the US homes figures for June and May.
These may provide some indication concerning the Fed’s monetary policy going forward.
An improvement, therefore, would prove positive for the ‘Greenback’.
The EUR/USD exchange rate will, however, remain sensitive to geopolitical developments this week.
If tensions increase in the Middle East, the US Dollar could continue to benefit from its safe-haven status.