EUR/USD Reaches New Highs, Could Test 1.08 Level
The fluctuating world of currency exchange continues as the EUR/USD pair reaches a fresh multi-week high of 1.0760. This is thanks to the euro gaining strength against the weakened US dollar.
While the world economy is still recovering from the effects of the COVID-19 pandemic, the pairing of the euro and US dollar remains one of the most closely watched in the currency markets. Traders and analysts alike are keeping a close eye on the EUR/USD as it continues to perform well in the current climate.
Economists at ING believe that if equities settle down, the EUR/USD could start to reconnect with yield differentials and head up towards the 1.08 area. However, they warn that any signs of stress in the US money market could quickly reverse these gains.
“Should equities settle down a little, EUR/USD could start to reconnect a little with yield differentials and head up to the 1.08 area.”
“Any severe signs of US money market stress could easily see these EUR/USD gains reverse.”
This is particularly important due to the ongoing uncertainty with regards to the pandemic, with many countries still struggling to get the virus under control. The US remains particularly vulnerable in this regard, with a lack of federal guidance and social distancing measures resulting in ongoing spikes in cases.
The Federal Reserve has also been playing a role in the fluctuations in the market. While they have indicated that interest rates will remain low for the time being, the long-term view remains uncertain. This, combined with financial stimulus packages, has resulted in a weakened dollar, driving the EUR/USD pairing upwards.
As always, the market is unpredictable, and market analysts and traders will be in a state of limbo until some measure of certainty returns to the global economy.
“The mood in EUR/USD may also be subdued ahead of the European Central Bank’s expected 50 bps hike tomorrow.”
All eyes will be on the upcoming meeting of the European Central Bank (ECB), which is expected to implement an interest rate hike of 50 basis points. This is a bold move, particularly given the ongoing pandemic, and may have a significant impact on the wider market and the EUR/USD pairing specifically.
Furthermore, the ECB’s decision is likely to set a precedent for other international banks, causing widespread changes in currency valuations in the coming weeks and months.
In conclusion, the EUR/USD pairing is currently strong, reaching new highs, and showing no signs of slowing down. However, the ongoing global pandemic and uncertain market conditions make accurate predictions challenging. As the world economy continues to operate under unprecedented circumstances, traders and analysts will be keeping a close eye on fluctuations in the market and taking action accordingly.
