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Euro US Dollar (EUR/USD) Exchange Rate Edges Higher as Covid-19 Vaccine Hopes Weigh on ‘Greenback’

July 15, 2020 - Written by John Cameron

EUR/USD Exchange Rate Rises as Investors Brace for Thursday’s ECB Interest Rate Decision

The Euro to US Dollar (EUR/USD) exchange rate rose by 0.3% today, with the pairing currently trading around $1.144.

The Euro (EUR) rose against the US Dollar (USD) after markets were lifted by hopes for a Covid-19 vaccine.

US biotech firm Moderna has also reported a potential vaccine for the coronavirus after producing a ‘robust’ immune response in all 45 human trial patients.

Craig Erlam, senior market analyst at OANDA Europe, comments:

‘Stock markets have been given another lift this morning by another promising vaccine trial, this time from Moderna, as the race to be the first to market intensifies.’

‘It goes without saying that a vaccine will be the gamechanger in the pandemic, the thing that will allow life to return to normal and businesses and households to thrive once again.’

Today also saw the Eurozone’s bond yields hold ground in the European Central Bank (ECB) ahead of tomorrow’s ECB meeting and Friday’s EU summit.

However, following hopes that Germany’s economy is levelling out, many EUR investors have remained positive about the Eurozone’s largest economy.

US Dollar (USD) Struggles as US Economy Recovery ‘Much Slower’ Than Expected

The US Dollar (USD) suffered from a sell-off of the safe-haven ‘Greenback’ on renewed hopes of a possible vaccine for the coronavirus. As a result, investors have instead sought out risky assets like the Australian Dollar and South African Rand instead.

In US economic news, today saw the release of the latest Industrial Production figure for June, which beat forecasts and rose by 68.6%.

Oren Klachkin and Gregory Daco of Oxford Economics said in a research note:

‘The road to a full recovery will be much slower compared to the initial strong bounce of the past two months that was prompted by the relaxation of social distancing measures.’

‘The virus’ resurgence in many states in recent weeks has already led to the re-imposition of social distancing measures that will drag on the recovery and bolster already significant headwinds facing the industrial sector.’

With uncertainty facing the American economy investors are becoming increasingly concerned over a second-wave of Covid-19 severely limiting the world’s largest economy.

EUR/USD Outlook: Could Covid-19 Vaccine Hopes Drag Down the US Dollar?

Euro (EUR) investors will be awaiting tomorrow’s announcement from the European Central Bank of its interest rate decision. With the ECB expected to hold rates at 0%, we may not see much movement for the single currency.

However, if the ECB is notably downbeat about the Eurozone’s economic performance going ahead, then we could see the EUR/USD exchange rate sink.

US Dollar (USD) investors will be looking ahead to tomorrow’s release of the US retail sales figures for July. Any improvement in the US economy could further buoy risk-sentiment and weigh on the ‘Greenback’.

The EUR/USD exchange rate will continue to be dictated by risk-sentiment this week. If hopes grow for a Covid-19 vaccine, then we could see the US Dollar suffer as investors seek out riskier assets.
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