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EUR to USD Exchange Rate Rebounds from Near Month Worst as Markets Await European Central Bank

September 9, 2020 - Written by David Woodsmith

After tumbling fairly consistently since hitting a notable high earlier last week, the Euro to US Dollar (EUR/USD) exchange rate saw a rebound from its lowest levels today. The Euro is steadying as investors await tomorrow’s European Central Bank (ECB) news, while the US Dollar’s rebound rally is gradually running out of steam and is being driven more by global coronavirus developments and shifts in risk-sentiment.

EUR/USD opened last week at the level of 1.1905 and briefly climbed even higher. However, after touching on a two year high of 1.2000, EUR/USD recoiled back from these highs and ended the week closer to the level of 1.1838.

This week’s movement has seen more gradual losses so far. The US Dollar’s rebound rally has continued, and EUR/USD briefly touched on a low of 1.1756 earlier today. It was the lowest EUR/USD level in almost a month, since early August.

Following this morning’s low, EUR/USD has rebounded slightly. At the time of writing, EUR/USD is firming higher in the region of 1.1813 as markets await tomorrow’s European Central Bank (ECB) policy decision.

EUR Exchange Rates Bounce despite European Central Bank (ECB) Anxiety

For much of this week so far, investors have been selling the Euro. The shared currency is under pressure amid speculation that the European Central Bank (ECB) will ramp up warnings about the Euro’s strength during tomorrow’s anticipated policy decision.

Expectations for the ECB to warn on the Euro’s strength have been priced into the Euro over the past week. They have been part of the Euro’s fall from its best levels against the rebounding US Dollar.

However, other factors have been bolstering the Euro’s support. This includes some stronger than expected Eurozone growth and German trade data, published yesterday.

It was ultimately a slight change in the market’s ECB outlook that helped the Euro to US Dollar exchange rate to rebound today though. Analysts claim that ECB officials are becoming more confident in forecasts for the Eurozone’s economic recovery.

According to Valeria Bednarik, Chief Analyst at FXStreet:

‘The catalyst seems to be a headline from Bloomberg, indicating that some ECB policymakers have become more confident in their forecasts for the region’s economic recovery, potentially reducing the need for more monetary stimulus this year. However, concerns remain the same.’

USD Exchange Rates Weaken as Rival Recovers

The US Dollar is the Euro’s biggest rival. As a result, it has been one of the currencies to be hit by the Euro’s rebound from its lows today.

For much of this week so far, the US Dollar’s rebound rally which begun last week has extended. The US Dollar’s appeal has been bolstered by European Central Bank (ECB) uncertainty weighing on the Euro, as well as higher market demand for safe haven currencies.

Investors have been more eager to buy safe haven currencies like the US Dollar lately, as the global coronavirus situation worsens again. Second wave fears, fresh lockdowns, and most recently a delay in a major vaccine trial, have all left investors looking for safer investments.

However, the US Dollar tumbled against the Euro this afternoon.

This was largely due to the Euro’s rebound on the latest European Central Bank (ECB) speculation.

However, some other factors keeping the US Dollar under pressure today may include a rebound in US stocks. It follows a tech stock selloff, which lasted much of the past week.

EUR/USD Exchange Rate Forecast: European Central Bank (ECB) Policy Decision in Focus

Thursday could be the most influential session of the week for the Euro to US Dollar exchange rate, depending on how the European Central Bank’s (ECB) September policy decision unfolds.

The ECB is not expected to announce any changes to Eurozone monetary policy during its September decision. However, there has been considerable speculation that the bank wi
ll become more dovish or ramp up warnings about the Euro’s strength.
On the other hand, speculation has also risen that ECB officials will show more confidence in the recovery of the Eurozone economy from the coronavirus pandemic.

As a result, the Euro could go either way tomorrow depending on the tone the ECB takes.

A more dovish European Central Bank could mean that EUR/USD resumes its downside bias towards the end of the week. A more confident or even hawkish ECB could help the Euro to recover from this week’s losses though.

While the European Central Bank policy decision will be tomorrow’s focus, some upcoming news could influence the direction of US Dollar trade as well.

Thursday will see the publication of July’s US wholesale sales report. This will be followed on Friday by US inflation rate data.

Of course, any surprise development in US coronavirus and political situations could also influence the Euro to US Dollar exchange rate.
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