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Euro Falls on US Stimulus Hopes, Later Rallies on Risk-On Sentiment

Today, the euro fell against the dollar due to the elevated demand for the safe-haven greenback as investors remained hopeful about the potential $1.9 trillion US stimulus package. The EUR/USD currency pair later reversed course and headed higher…

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Today, the euro fell against the dollar due to the elevated demand for the safe-haven greenback as investors remained hopeful about the potential $1.9 trillion US stimulus package. The EUR/USD currency pair later reversed course and headed higher as market sentiment shifted in favour of riskier assets causing the dollar to tank against its peers.
The EUR/USD currency pair fell to a low of 1.2019 in the mid-Frankfurt session before rallying to a high of 1.2065 in the American market but was off these highs at the time of writing.

The currency pair’s initial decline was fueled by rising US Treasury yields, which boosted the greenback as tracked by the US Dollar Index. The pair’s decline was further supported by the disappointing German industrial production report for December. According to the Federal Statistical Office, Germany’s industrial production remained flat in December compared to analysts’ expectations of 0.3% growth. The downbeat eurozone Sentix investor confidence print for February, which came in at -0.2 versus consensus estimates of 1.9 also weighed on the pair. The pair’s rally was also boosted by the ECB Governor Christine Lagarde‘s speech favouring accommodative monetary policies.

The currency pair headed higher during the American session as investor risk appetite soared boosted by the rally across US equity markets. Investors bought riskier assets driven by the expectation of a $1.9 trillion US stimulus package backed by Treasury Secretary Janet Yellen.

The currency pair’s future performance is likely to be affected by tomorrow’s German trade balance data.

The EUR/USD currency pair was trading at 1.2049 as at 19:21 GMT having rallied from a low of 1.2019. The EUR/JPY currency pair was trading at 126.80 having fallen from a high of 127.12.


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Author: Simon Mugo

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