August 24, 2020 - Written by John Cameron
STORY LINK Euro to US Dollar (EUR/USD) Exchange Rate Rangebound as Safe-Haven Demand is Hit by Covid-19 Treatment Hopes
EUR/USD Exchange Rate Steady as Covid-19 Treatment Hopes Weigh on ‘Greenback’
The Euro to US Dollar (EUR/USD) exchange rate held steady today, with the pairing currently fluctuating around $1.180.
The US Dollar (USD) failed to gain on the Euro (EUR) today following US President Donald Trump’s authorisation of blood plasma treatment for the coronavirus. As a result, investors have sought out riskier assets on hopes of a possible vaccine for the virus.
Meanwhile, concerns are growing over the ‘Greenback’s safe-haven status.
Strategists at BlackRock explain:
‘The prospect of the dollar retaining its perceived safe-haven status is another concern. We are weighing these as a contentious U.S. presidential election looms.’
In US economic news, today saw the release of the Chicago Fed National Activity Index for July, which undershot forecasts and fell from 5.33 to 1.18.
Euro (EUR) Steady as Eurozone Economy ‘Lost Momentum in August’
The Euro (EUR) also struggled today following Friday’s release of the Eurozone’s PMI figures for August. The Eurozone’s PMI Composite figure for August fell below forecasts from 54.9 to 51.6.
Andrew Harker, Economics Director at IHS Markit, commented on the report:
‘The eurozone’s rebound lost momentum in August, highlighting the inherent demand weakness caused by the COVID-19 pandemic. The recovery was undermined by signs of rising virus cases in various parts of the euro area, with renewed restrictions impacting the service sector in particular. Manufacturers continued to post marked increases in output and new orders.’
Meanwhile, the Euro (EUR) has also suffered from a sell-off of safe-haven assets, with investors fleeing the single currency in favour of risky assets like the Australian Dollar and South African Rand.
EUR/USD Forecast: Could Covid-19 Vaccine Hopes Drag Down the Safe-Haven ‘Greenback’?
Euro (EUR) investors will be looking head to tomorrow’s release of Germany’s GDP figure for the second quarter. If the Eurozone’s largest economy continues to struggle, however, we could see the EUR/USD exchange rate dip.
Tomorrow will also see the release of August’s German IFO Business Climate report. If this confirms consensus, however, and rises from 90.5 to 92, then we could see the single currency edge higher.
US Dollar (USD) traders will be looking ahead to tomorrow’s release of the US New Home Sales report for July. Any improvement, however, could drag down the ‘Greenback’ as investors become more hopeful about the global economy’s recovery.
The EUR/USD exchange rate will continue to be driven by global economic developments around the coronavirus this week. As a result, the US Dollar (USD) could fall as hopes for a possible Covid-19 vaccine grow.
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