The euro slumped to a 4-month low versus the US dollar on Monday. Growing concerns over coronavirus boosted safe haven demand whilst a bullish outlook for the US economy plus disappointing eurozone statistics made the greenback more attractive than the euro.
The euro US dollar exchange rate plummeted to a nadir of US$1.0908 before closing the session 0.34% lower at the low. The euro is consolidating those losses in early trade on Tuesday.
Euro
Weaker investor morale in the eurozone dragged on the value of the euro in the previous session. The Sentix investor confidence index fell to 5.2 in February, down from 7.6 in January amid growing concerns over the economic impact of coronavirus and the manufacturing slump in Germany.
Today, whilst the number of coronavirus deaths has reached 1000, the rate of infection has slowed slightly easing coronavirus fears in the financial markets. Attention will now turn towards the European Commission’s Economic Growth Forecasts for fresh impetus. ECB Christine Lagarde will be speaking before the European Parliament.
US Dollar
Relatively strong US data in the previous week helped lift the US dollar on Monday. Investors continued to cheer the impressive headline number from the US jobs report, which showed 225,000 jobs were created in January.
At the same time the dollar also received a boost from safe haven flows on the back on coronavirus fears.
Today attention will turn squarely to Federal Reserve Chair Jerome Powell as he goes to Capitol Hill for his semiannual testimony before Congress. Today he will testify before the House of Representatives, this will be followed by a testimony before the Senate on Wednesday.
Jerome Powell’s testimony comes at a crucial junction for the US economy. On the one hand, the US is exiting a damaging trade dispute with China, inflation is low but the US labour market remains robust. However, on the other hand, concerns exist over the impact that coronavirus could have on the global economy. Could this be the event that puts the Fed back on its rate cutting cycle?
