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EUR to USD Exchange Rate Struggles as Eurozone Data and Safe Haven Demand Weigh

July 7, 2020 - Written by Toni Johnson

The Euro remains broadly appealing versus the US Dollar, but the Euro to US Dollar (EUR/USD) exchange rate is struggling to hold its best levels this week. Though the Euro continues it advance attempts, its gains are limited as the latest EU forecasts show the Eurozone being hit harder than expected by the coronavirus pandemic. The US outlook remains marred by coronavirus uncertainty as well.

Last week saw EUR/USD continue its upside bias. After opening last week at the level of 1.1218, the pair edged higher throughout the week. EUR/USD ultimately closed the week slightly higher, in the region of 1.1248.

This week, the Euro has been even stronger so far despite some Eurozone uncertainties. EUR/USD jumped to a high of 1.1343 yesterday – this was the best level for the pair in half a month.

Since then, EUR/USD has seen more mixed movement. EUR/USD has struggled to hold its best levels, dipping this morning, but the pair still ultimately trends high in the region of 1.1296 at the time of writing.

EUR Exchange Rates Struggle to Hold Best Levels as Eurozone Outlook Worsens

The Euro struggled to hold its best levels today. While the shared currency continues to benefit from hopes that the Eurozone economic rebound from the coronavirus pandemic will be solid, some of the latest data from the Eurozone has been concerning.

The European Commission (EC) released its latest EU growth forecasts today. The figures were gloomy, with the EC generally indicating that the Eurozone would be hit even harder by the pandemic than previously expected.

According to Connor Campbell, Analyst at Spreadex:

‘The broad direction of the bloc’s GDP revisions was sharply downwards. As a whole the European Union is now facing am 8.3% contraction in 2020, compared to the 7.4% estimate announced in May. France saw one of the more significant changes, the country looking at a 10.6% drop, far higher than the 8.2% decline initial forecast.

Spain and Italy were both dealt their own ugly numbers, heading for -11.2% and -10.9% respectively. Germany, on the other hand, saw a minor improvement, their typical Teutonic efficiency resulting in a move from -6.5% to -6.3%.’

This morning’s German industrial production results also dampened appetite for the Euro. Industrial production was expected to rebound to 10% but instead only rose to 7.8%.

USD Exchange Rates Avoiding Deeper Losses as Safe Haven Demand Persists

The US Dollar has been struggling to mount a solid recovery against the Euro lately. The EU’s coronavirus outlook is generally seen as more positive than the US outlook, as the number of cases in the US surges.

However, ‘second wave’ fears are ultimately helping to boost the US Dollar as well, as the US Dollar is a safe haven currency.

Investors have been gradually more eager to avoid risks and look for safer investments as coronavirus fears worsen again.

According to Viraj Patel, Global FX and Macro Strategist at Arkera:

‘After yesterday’s strong risk rally - which also drove risky currencies higher - the reality of regional lockdowns in places like the US, UK, Spain and now Australia are a gentle reminder that the threat of a second coronavirus wave is one that investors should not be quick to price out,’

Concerns about the health of the US economy, as well as coronavirus jitters, are ultimately preventing the US Dollar from capitalising on safe haven demand though.

The latest US job vacancies data from JOLTs showed more job openings than expected, but analysts remain anxious about the health of the US job market.

EUR/USD Exchange Rate Forecast: Could Central Banker Comments Inspire Movement?

The Euro to US Dollar exchange rate continues to trend with an upside bias despite the EU’s more gloomy forecasts today.

However, if factors continue to weigh more on the Euro, the shared currency could come under further pressure and have a harder and harder time holding its ground.

Investors have been anxious about potential disagreement among European Central Bank (ECB) policymakers. If tomorrow’s comments from ECB officials deepen these concerns they could lead to fresh Euro losses.

Over in the US, Federal Reserve comments could impact the US Dollar tomorrow if they surprise investors. Tomorrow’s lack of notable Eurozone or US ecostats could leave central bank comments more influential.

Of course, developments over the coronavirus pandemic could also cause movement in the Euro to US Dollar exchange rate.
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