The Euro is on the rebound on Friday, snapping three straight sessions of losses. The Euro US Dollar exchange rate closed on Thursday 0.7% lower at US$1.1183, after hitting a 10-day nadir.
At 08:30 UTC, EUR/USD is trading +21 points (+0.2%) as it pushes through US$1.12.
Euro Helped By Improved Risk Sentiment
The Euro dropped in the previous session even as the European Central Bank refrained from cutting interest rates. The ECB had been widely expected to cut rates by 10 basis points to shore up the eurozone economic ahead of the coronavirus hit. Instead the ECB expanded its bond buying programme by €120 billion for the year and applied other smaller more targeted measures.
The euro dived as investors moved into the US Dollar for its safe haven properties, as panic spread across the financial markets. The German stock market plunged over 12% in its worst day of losses in over 3 decades.
The euro also completely ignored positive eurozone data, which showed that industrial production rose by 2.3% month on month in January, well above the 1.9% advance forecast.
Today there is a turnaround in risk sentiment which is offering support to the euro. European stock markets have opened higher.
US Dollar Pauses For Breath
The US Dollar is trading broadly flat versus its peers on Friday after experiencing a solid jump higher in the previous session. The Dollar soared on Thursday as investors desperately sought out its safe haven properties, as riskier assets and currencies were sold off. US stocks plunged 10%.
In an attempt to calm the increasingly dysfunctional markets, the Federal Reserve of New York stepped in with a massive liquidity injection of $1.5 trillion and wider treasury purchases.
Investors will now look ahead to next weeks’ Federal Reserve monetary policy meeting. Investors are starting to believe that the Fed could cut interest rates by 100 basis points, rather than doing a 50 basis point cut in March followed by another in April. The Fed is also expected to announce a bond buying programme. With few signs of meaningful fiscal stimulus coming soon, the markets are looking to the Fed for support.
