After shedding 1.5% versus the US dollar in the previous session, the Euro is pushing tentatively higher in early trade on Wednesday. At 08:00 UTC, EUR/USD is holding just above $1.10 after the biggest the pairs biggest single day decline since June 2018.
When Will European Stability Mechanism Come In?
The euro is holding above $1.1 as the EU debates whether to harness the eurozone crisis fund in the fight against coronavirus.
Member starts are debating how and when to bring in the Europeans Stability Mechanism (ESM), a powerful rescue fund to fight the economic impact of coronavirus. Member states ae divided as to how soon and under what conditions the €500 billion fund should be brought in, as the region is facing the greatest economic challenge since the 2008/9 financial crisis.
Officials are considering offering credit line to several member states. This would be a change from the ESM’ previous actions of supporting just one-member state, as it did with Greece. Unlocking this level of credit could go a long way to help fighting the eurozone’s rapidly deteriorating economic situation.
Eurozone inflation data is expected to go unnoticed given that it is for February before the coronavirus outbreak really took hold in Europe. Analyst expect inflation of 1.2% year on year.
Dollar Rally Cools
The US Dollar is pausing for breath on Wednesday after storming higher in the previous session. As coronavirus fears continue to escalate and unnerve the markers investors are looking to the US Dollar for its safe haven properties.
Investors are selling out of almost everything in order to buy dollars. Even traditional safe have gold is being sold out of for a rotation into cash and more specifically US dollars. Despite the Federal Reserve pumping billions of dollars into the financial system there are still insufficient dollars for demand, which is pushing the price higher. This is evident in the US bond yield which jumped 34 points overnight, the biggest one day jump since 2004.
The move into dollars is only seen to this extent when investors and businesses are very nervous about the future and look to hoard cash to see them through the virus outbreak.
