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EUR to USD Exchange Rate Flounders Near May Worst as Currencies Recoil

May 20, 2019 - Written by David Woodsmith

Amid mixed economic outlooks for both the Eurozone and the US, the Euro to US Dollar (EUR/USD) exchange rate’s movement has been mixed in recent weeks and the pair continued to fluctuate when markets opened yesterday. Ultimately though, the Euro is struggling to recover from its worst levels all month as investors become anxious ahead of this week’s upcoming EU elections.

The US Dollar has overall been stronger due to safe haven demand, but EUR/USD lost less than a cent overall last week. EUR/USD opened the week at the level of 1.1234 and closed at the level of 1.1166. Since opening this morning, EUR/USD has briefly hit its lowest level all month – 1.1151, but has generally trended closely to the week’s opening levels.

Demand for the Euro has been limited, as while there are hopes for economic resilience in the Eurozone, there are also lingering concerns that the bloc could be hit by trade uncertainties or political developments.

Meanwhile though, then US Dollar has been unable to hold its best levels as investors are hesitant to buy the currency ahead of this week’s Federal Reserve news.

EUR Exchange Rates Flounder as Political Uncertainties Come Back into Focus

In recent weeks, demand for the Euro has been a little stronger. While this hasn’t been enough to help the Euro to sustain gains against a stronger US Dollar, it has limited the Euro to US Dollar exchange rate’s losses.

Investors have been hopeful that the Eurozone’s economy has been more resilient than expected this year so far, due to signs of strength in datasets over the past few weeks.

However, other factors have weighed on the Euro’s appeal and left the shared currency’s movement mixed rather than strong.

There are still signs of weakness in the latest Eurozone data, but the primary cause of Euro weakness this week so far has been uncertainty over the upcoming EU elections.

Citizens across EU nations will head to the polls on Thursday to vote for parties to represent their nation in EU Parliament.

Investors are becoming more anxious about the possibility that Eurosceptic Parties will perform particularly strongly during the elections.

Rising Euroscepticism would leave investors more anxious about the stability of the Eurozone and the Euro. As a result of this political uncertainty, the Euro is unappealing today.

USD Exchange Rates Steady Following Last Week’s Strength

Investors piled into the US Dollar last week, despite rising concerns that the US economy could be hit by a US-China trade war, as well as mixed US data leaving investors concerned that the Federal Reserve could cut US interest rates at some point over the next year.

This was largely due to market demand for safe haven currencies. The US Dollar, as a safe haven currencies, often benefits in times of market uncertainty, such as the recent resurgence in US-China trade tensions.

As concerns of a US-China trade war deepen and investors are anxious that this could negatively impact the US economy too, the US Dollar’s potential for gains has been limited.

This, as well as market anticipation for this week’s upcoming Federal Reserve news, has prevented the US Dollar from seeing further gains against the Euro.

On the market’s hesitance to move much, Chuck Tomes from Manulife Asset Management said that a speech from Fed Chairman Jerome Powell tonight was likely to be watched closely:

‘[the speech] will be something we’re watching very closely to see if there are any comments from the Federal Reserve as to if they feel there will be a change in their outlook ... because of the increased trade tensions,’

EUR/USD Exchange Rate Forecast: Fed News and Eurozone Confidence Stats in Focus

This week’s biggest news for Euro to US Dollar exchange rate investors won’t be until towards the end of the week, when reaction to EU elections and the Federal Reserve’s meeting minutes will drive movement.

However, anticipation for that news, as well as a few notable ecostats, could influence the Euro to US Dollar exchange rate’s movement tomorrow.

Overnight, US Dollar investors will focus on and react to a fresh speech from Fed Chairman Jerome Powell. If Powell makes any surprising comments on US monetary policy, it could cause a notable shift in Fed interest rate hike bets.

Tomorrow though, the most influential news will be the Eurozone’s May consumer confidence projection.

If these disappoint, the Euro could face deeper pressure as the bloc’s economic uncertainties would worsen.

US existing home sales data will be published tomorrow as well, but Euro to US Dollar exchange rate investors are more likely to await Wednesday evening’s Fed meeting minutes than react to US data.
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