Euro US Dollar (EUR/USD) Exchange Rate Recovers from 3-Month Low

February 18, 2019 - Written by John Cameron

STORY LINK Euro US Dollar (EUR/USD) Exchange Rate Recovers from 3-Month Low

Rising Risk Appetite Supports Euro US Dollar (EUR/USD) Exchange Rate

The Euro US Dollar (EUR/USD) exchange rate rose to $1.1322 on Monday.

The pairing edged ever so slightly higher despite the lack of data from Eurozone and US markets being closed for President’s day.

The Euro was able to gain on the US Dollar as risk appetite improved on the back of hopes for a US/China trade deal.

Adam Cole, a Currency Analyst at RBC Capital Markets suggested that the risk-on mood would continue, adding:

‘Generally the mood is still quite positive on the outlook for trade.’

Last Week: US Dollar (USD) Slips on ‘Very Productive’ US-China Negotiations

The US-China trade discussions concluded in Beijing on Friday, with mixed reports of how successful they had been.

However, with further discussions scheduled for this week in Washington there are hopes an agreement could be reached.

When discussions concluded on Friday US Trade Representative Robert Lighthizer said he remained ‘hopeful’ of progress, further stating:

‘We feel that we have to make headway on some very, very important and very difficult issues.’

After being briefed on the talks and prepared for further talks this week, US President Trump called the talks in Beijing ‘very productive.’

Both Trump and his Chinese counterpart, Xi Jinping sounded upbeat, with Trump saying it would be his ‘honour’ to remove the tariffs, and Xi saying the latest round of meetings ‘achieved important progress in another step.’

However, Trump’s optimism did not line up with the official statement from the White House, which warned that ‘much work remains’, and did not mention the ‘consensus in principle’ that had been cited in the Chinese statement. Despite this, the news still improved demand for higher-risk currencies and weakened the safe-haven US Dollar.

Dovish ECB Speech Weakens Euro (EUR) Exchange Rates

Today’s modest EUR/USD gains have helped the Euro claw back some of its recent losses.

The pairing fell to a three-month low following a speech from the European Central Bank’s (ECB) Benoît Cœuré.

During his speech he said that a new round of cheap loans to banks within the bloc was possible.

He also noted that the Eurozone’s economic slowdown would be ‘stronger and broader’ than expected, and more multi-year loans were being discussed.

This exacerbated concerns for the bloc’s economic outlook and left the Euro weaker.

EUR/USD Outlook: Will a Rise in Economic Sentiment Buoy the Euro?

Tuesday could see the Euro US Dollar (EUR/USD) exchange rate continue to rise, as the ZEW economic sentiment survey for February is due for release for both the Eurozone and its largest member, Germany.

The forecast shows that economists are expecting an improvement in sentiment, with the German survey predicted to increase from -15 to -13.4. Such a result could lend the EUR support.

As the start of the week is quiet for US data, it is likely that the continued trade discussions in Washington between the US and China will remain in focus.

If there are signs that indicate the talks are not progressing as well as expected, it could see investors flock back to the safe-haven USD.

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TAGS: Euro Forecasts