Euro to US Dollar Outlook: EUR Holds Against USD but Euro Volatility Increases

Monthly Currency Guide

The euro and the US dollar have both seen mixed movement this week. As a result, the euro to US dollar exchange rate has seen broadly mixed movement. Even as the US dollar saw a strong recovery today, the pair was able to avoid notable losses. Weak US data saw the American currency tumble, whilst strong Eurozone data helped the single currency edge higher from the level of 1.0831 to 1.0848 yesterday. The movement that has been observed this week was more bullish in comparison with the EURUSD exchange rate seeing more of an upside bias. Whilst the euro to US dollar exchange rate has been unable to keep hold of the 2-week high of 1.0894 seen earlier in the day on Wednesday, the pair continued to trend higher in the region of 1.0872 at the end of Wednesday trading. The week still has its most important Eurozone and US data up ahead, with the upcoming data set to cause notable movement between the euro and the US dollar.

Euro exchange rates dodge losses despite ECB dovishness

The euro managed to avoid major losses against many of its major rivals on Wednesday, including its biggest rival, the US dollar. EUR managed to recover slightly after Tuesday’s decline on fears that the coronavirus has rapidly spread within Italy. Despite this recovery, with the drop on Tuesday and Wednesday’s recovery, the euro is becoming noticeably more volatile.

Meanwhile, uncertainty over the potential of the coronavirus hitting the euro, alongside further worries that the Eurozone may not recover after the recent slowdown has kept investors on edge as they debate the risk of buying into EUR.

The European Central Bank (ECB) has had the odds of an interest rate cut inflated as uncertainty enshrouds the currency. But despite these factors, investors are hesitant to sell-off the euro too much as recent economic data from the Eurozone has been positive, which has led to the currency still be in favour with investors.

USD recovers from losses, but Wednesday was more about recovery than gains

Wednesday saw the US dollar pick up the pieces from Tuesday’s slump. Investors noticed that the American currency was recovering rather than gaining from any new developments as speculations over the coronavirus mounted. The market predicts a shift in the Federal Reserve’s (Fed) monetary policy, but suggests that it may be one of the few central banks with the room to alter it. But the rate cut bets were short lived, as Fed officials noted on Wednesday that there is not yet any sign that a rate cut will be the correct action to take, which led to bets falling and the US dollar regaining ground.

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