The US Dollar is on the rise on Tuesday as The Euro US Dollar exchange rate closed on Monday flat at US$1.1164, in the first session of trading after the US Federal Reserve slashed interest rates by 1%, which overshadowed the turmoil that coronavirus is causing in Europe.
At 08:00 UTC the EUR/USD is trading at US$1.1130, down -0.4% at the lower end of the day’s trading range.
Euro Drops As Eurozone Economic Turmoil Grows
The Euro is declining as investors digest more lock downs across Europe. Shops, hotels, travel and leisure firms are grinding to a halt as governments impose lock downs in a bid to control the spread of coronavirus. The prospect of a recession in the eurozone has grown considerably.
As fears of an economic hit more painful than the financial crisis of 2008 grow, European leaders are being urged to deliver a more robust and coordinated fiscal response. The European Central Bank has already pledged a few measures to help the situation. However, analysts believe that the central bank will need to go further.
Investors will now look towards the ZEW sentiment data. Analysts are expecting a sharp decline in morale as coronavirus fears take hold. Forecasts are for ZEW sentiment index to drop from 8.7 in February to -26.4 in March. This would be the worst reading since August 2019. A weaker reading could unnerve investors.
Dollar Advances Despite Fed’s Easing
The US Dollar traded on the back foot across the board on Monday after the Federal Reserve delivered an emergency rate cut of 100 basis points and announced quantitative easing by pledging to buy $700 billion in treasuries.
The move by the Fed was unable to stem fears of a recession in the US and the US stock market plummeted 13% in its biggest one-day loss in over 3 decades. Economists are now expecting a steep economic contraction, certainly in the second quarter as the US government imposes social distancing measures, affecting shops, restaurants, travel whilst encouraging workers to work from home.
Today the US Dollar is holding steady as investors await the Commerce Department to issue its report later in the day. Analysts are expecting retail sales to have risen 0.2% in February, down from 0.3% increase in January.
