Euro US Dollar Exchange Rate Recovers as ECB Unlikely to Cut Eurozone Rates Any Time Soon
For much of the past week, the Euro US Dollar (EUR/USD) exchange rate has been tumbling. Higher safe haven demand boosted the US Dollar (USD), while the Euro (EUR) was weighed by rival strength and central bank speculation.
EUR/USD opened the week at the level of 1.2171 and trended lower throughout the week. In the middle of the week, EUR/USD touched on a fortnight low of 1.2067.
On Friday though, EUR/USD saw a little more solid footing and recovered most of the week’s losses. At the time of writing on Friday afternoon, EUR/USD is trending in the region of 1.2140.
Euro (EUR) Exchange Rates Avoid Losses but Analysts Still Express Caution
In the middle of the week, Euro investors were spooked by comments from European Central Bank (ECB) officials, suggesting that markets were underestimating the chances of interest rate cuts from the bank.
Before markets closed for the week, other officials said the chances of a rate cut happening any time soon were quite low. This helped the Euro to steady on Friday.
Still, analysts expressed caution over the Euro, suggesting that the ECB will continue to try to keep the Euro from getting too strong. According to Analysts at TD Securities:
‘Still, we think the jawboning of the currency won’t stop and skepticism over the EUR should remain. For all the focus on the vaccine race, the EU is definitely losing all the while it disputes a major vaccine provider. This threatens a multi-albeit unimpressive-speed recovery in the EU.’
US Dollar (USD) Exchange Rates Safe Haven Appeal Softens a Little
Investors found the US Dollar appealing as a safe haven currency for most of the week, as coronavirus pandemic and stock market jitters made traders anxious.
The US Dollar’s appeal as a safe haven softened a little before markets closed for the week though. Markets cooled a little from the week’s uncertainties and became a little more willing to take risks.
This made it easier for EUR/USD to recover from weekly lows.
Underwhelming US data published today also weighed on the US Dollar, making it harder for the currency to hold its weekly gains.
Euro US Dollar (EUR/USD) Exchange Rate Awaits Key Data for Economic Outlooks
The Eurozone and US economic outlooks are mixed, amid concerns over how hard these economies are being hurt by the coronavirus pandemic in recent months.
As a result, the slew of key Eurozone and US data due for publication in the coming week could give investors a better idea of how the economies are performing. This could cause a shift in EUR/USD movement.
Monday will see the publication of German retail sales results, Eurozone unemployment, and manufacturing PMI stats for both the Eurozone and US.
Eurozone growth rate data from Q4 2020 will be published on Tuesday. This has potential to be one of the week’s most influential datasets.
Non-manufacturing PMI data will be published on Wednesday, Eurozone retail data is due on Thursday.
However, one of the week’s most influential reports will be the US Non-Farm Payroll report, due Friday. Any surprises about the health of the US economy could cause a shift in market sentiment that could influence the Euro US Dollar (EUR/USD) exchange rate.