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Euro to US Dollar (EUR/USD) Exchange Rate Falls as Demand for Safe-Haven ‘Greenback’ Rises

January 13, 2021 - Written by John Cameron

EUR/USD Exchange Rate Edges Higher as Speculation Grows Over Fed Easing Stimulus

The Euro to US Dollar (EUR/USD) exchange rate fell by -0.3% today, with the pairing currently fluctuating around $1.21.

The US Dollar (USD) rose today as demand for the safe-haven ‘Greenback’ has risen due to rising concerns over the soaring number of Covid-19 cases worldwide.

Added to this, speculation is growing over the Federal Reserve easing its Covid-19 stimulus programmes as the outlook for the US economy continues to improve.

Today saw the release of the latest US Consumer Price Index for December, which confirmed consensus and held at 1.6% year-on-year.

Neil Birrell, chief investment officer at Premier Miton Investors, commented:

‘Inflation is one of the watch words for investors at the moment, with bonds starting to discount a pick-up, all data points will get scrutinised. But the US numbers out today were in line with expectations and still show little by way of upside surprise.

‘Given the situation with COVID, it is probably unsurprising that prices aren’t moving higher for now. The focus will be on the size of the next COVID relief package and what that might bring.’

Any further global economic uncertainties, however, could increase demand for the safe-haven USD later today.

Euro (EUR) Falls as Germany’s Covid-19 Lockdown Could Extend Until April

The Euro (EUR) struggled today as fears continue to rise that Germany’s Covid-19 lockdown could last until April.

As a result of a highly infectious new strain of the coronavirus has begun to spread throughout Germany – the Eurozone’s largest economy – EUR traders are becoming increasingly downbeat about the bloc’s economic recovery.

German Chancellor Angela Merkel announced that the lockdown could be extended for another 8 to 10 weeks to curb the spread of the coronavirus.

However, EUR investors given some relief after the European Central Bank’s (ECB) President, Christine Lagarde, said that the outlook for the Eurozone’s economy remains basically on target.

Lagarde said:

‘I think our last projections in December are still very clearly plausible.’

EUR/USD Forecast: Could Demand for the Safe-Haven US Dollar Rise This Week?

Euro (EUR) traders will be awaiting tomorrow’s release of the European Central Bank’s (ECB) Monetary Policy Meeting Accounts.

Any indications that the Eurozone’s economy could be headed for a serious downturn in the months ahead will be EUR-negative.

US Dollar (USD) traders will be awaiting tomorrow’s speech from the US Federal Reserve’s Chairman, Jerome Powell.

If Powell is sceptical about the US economy’s ability to recover in the near-term, we could see speculation grow over the Federal Reserve extending its stimulus programme.

As a result, we could see demand for the safe-haven ‘Greenback’ rise as the outlook for the world’s largest economy grows increasingly uncertain.

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