The US Dollar is staging a recovery on turnaround Tuesday after an extraordinarily volatile trading session on Monday. The Euro (EUR) US Dollar (USD) exchange rate closed Monday 0.2% higher at US$1.1403, after having rallied to a 5-month peak of US$1.1493 earlier in the session on Monday.
Today, EUR/USD is trading lower. At 07:15 UTC EUR/USD is trading -0.7% lower at US$1.1360 as investors consider containment of coronavirus and as euro investors digest the Italian lock down look ahead to the ECB meeting later this week.
Euro Eases From 14 Month High
The euro is paring recent gains. Amid an unusually volatile market the euro had benefited from safe haven flows instead of the US dollar. However, today as market sentiment attempts to return to a more stable state, the euro is on the back foot.
Italy is now on full lock down with travel restricted in the country and the public told to stay indoors in a bid to get a grip on the deadly virus which has seen more than 9000 infections and 463 deaths. All public gatherings have been suspended and movement is being restricted.
Attention is now turning to the European Central Bank meeting later this week. The ECB already have negative interest rates in place meaning that they have limited room for action. That said the markets are pricing in 2 rate cuts by June. This is up from just one last week.
Today the release of the eurozone GDP could attract some attention, although it is unlikely to provoke strong reaction given its backward view and that it doesn’t account for coronavirus outbreak.
US Dollar Rises On Trump’s Pledge
As risk sentiment improves, lifting US equity futures, US Treasury yields and the US dollar are rising. After carnage in the US financial markets on Monday a sense of calm is returning. President Trump’s announcement that he will ask Congress to pass emergency economic relief has gone some way to easing fears surrounding the economic impact of coronavirus on the US economy.
The fact that Wuhan, the Chinese city and province at epicentre to the virus is opening its boarders again is also helping investor sentiment.
