EUR/USD Exchange Rate Edges Higher on US Fiscal Stimulus Jitters

EUR/USD Exchange Rate Avoids Deeper Losses as Safe Haven Demand Softens 

After starting this week on a bearish note, the Euro to US Dollar (EUR/USD) exchange rate has been attempting various limited recoveries since. Today, concerns about US fiscal stimulus are limiting demand for the US Dollar (USD). 

EUR/USD opened this week at the level of 1.2257 and has been trending lower since. EUR/USD has still been able to sustain some of last week’s gains despite the USD rebound though. The pair remains well above last week’s lows of 1.2107. 

At the time of writing on Wednesday morning, EUR/USD is attempting to rebound again and trends in the region of 1.2183. 

The Euro’s (EUR) movement continues to be driven largely by rival strength. If the US Dollar rebound continues, the Euro may have more losses ahead. 

Euro (EUR) Exchange Rates Benefit from Weakness in Rivals 

This week so far, investors have been selling the Euro as its rival the US Dollar rebounds. The Euro is also being weighed by Pound gains as Brexit deal hopes persist. 

Demand for the Euro has been little-impacted by the week’s Eurozone data. Data continues to indicate that the Eurozone economy is weathering the coronavirus pandemic better than expected. 

However, amid fears that a new more contagious coronavirus strain could hit Europe and pressure more restrictions, the Euro’s appeal is not as strong as it was last month. 

US Dollar strength, as well as fears of more Eurozone lockdown, are keeping the Euro under pressure. 

US Dollar (USD) Exchange Rates Slide amid US Fiscal Stimulus Uncertainty 

Over the past week, US Congress finally agreed to a big stimulus plan to support the US economy amid the coronavirus pandemic.  

Market relief actually played part of the US Dollar’s rebound this week, despite the US Dollar being primarily boosted by safe haven demand. 

However, fresh uncertainty over whether or not the bill will be passed is keeping the US Dollar from moving too much today. US President Donald Trump has threatened to veto the bill as it does not provide enough support to citizens and small businesses. 

According to Marc Ostwald from ADM Investor Services: 

‘Trump’s threat to block the US stimulus bill has all the hallmarks of populism (he is in favour of a one off Payment of $2,000 as opposed to the bill’s $600, and wants cuts to envisaged foreign spending), but also of the scorched earth policy that has been so evident since the election.’ 

Euro to US Dollar (EUR/USD) Exchange Rate Could Recover if Markets Calm 

The US Dollar has been rebounding on safe haven demand this week. However, this also means that if markets calm, safe haven demand could soften and the Euro to US Dollar exchange rate could avoid losses. 

This afternoon, some notable US ecostats will be published. If US PCE inflation figures or durable goods beat forecasts, they could bolster the US Dollar’s appeal. 

On the other hand though, the US Dollar’s movement may remain focused on shifts in market safe haven demand. 

If the US fiscal stimulus plan fails after all, the US Dollar could climb as investors look for safe havens. If it still passes, as many expect it will, the US Dollar may weaken instead as the latest market panic calms. 

Market panic also depends on how the new coronavirus strain develops. If the strain spreads into Europe, the Euro may remain unappealing and investors may sell the Euro to US Dollar (EUR/USD) exchange rate amid risk-aversion.