The euro managed to snap a 7-session losing streak versus the US dollar on Tuesday. The euro US dollar exchange rate has lost 1.5% against the greenback so far this month and 2.5% so far this year. Th pair hit a fresh four month low of US$1.0892 on Tuesday before picking up slightly into the close. The pair closed 0.1% higher at $1.0920.
EUR/USD is on the back foot and continues to hover around 4-month lows in early trade on Wednesday.
EUR/USD – Euro recovered later in the session following Lagarde’s speech
The euro dipped in early trade on Tuesday, only to recover later in the session following European Central Bank President Christine Lagarde’s speech before the European Parliament. Once again Christine Lagarde pushed for further fiscal spending by governments in the bloc.
Today investors will be looking towards the release of Eurozone industrial production data. Analysts are expecting industrial output to have declined -1.7% month on month in December. This would be a significant downturn from the 0.2% increase in November. A weak reading would support the view that the bottoming out of the slump in the manufacturing sector was still some way away. Economic data could get worse before it improves.
The dollar traded broadly lower versus its peers on Tuesday
The dollar traded broadly lower versus its peers on Tuesday, as safe haven flows eased and as Federal Reserve Chair Powell struck an even tone in his testimony to the House of Representatives.
Jerome Powell told Congress that the US economy is in a good place despite the potential threat of coronavirus on the Chinese and global economy. He spoke of risks associated to the trade war easing and of the strong US labor market. He also said that the US economy was performing well and saw no reason why economic expansion couldn’t continue. He reiterated that the Fed considered the current position on monetary policy appropriate.
Jerome Powell spoke about the risks associated to the coronavirus outbreak on the Chinese economy and its close trading partners. He mentioned that there could well be some impact on the US economy. There was nothing new in his answers to drive the US dollar.
Today, the dollar is rebounding as investors await Jerome Powell’s testimony before the Senate. Another well balanced appearance could keep volatility out of the dollar.