- Coronavirus statistics and economic data have been supportive of the Euro (EUR)
- Questions over whether EU leaders will reach an agreement over covid-19 rescue fund could drag on the common currency
- US Dollar (USD) eases on vaccine developments as Moderna reports encouraging report
- Risk sentiment capped by elevated US – China tensions as Trump ends Hong Kong’s special status
The Euro US Dollar (EUR/USD) exchange rate is extending gains for a fourth consecutive day on Wednesday. The pair settled on Tuesday +0.5% at US$1.1398.
At 07:15 UTC, EUR/USD trades +0.1% at US$1.1405, as it eases back from the 4 month high of US$1.1423 struck at the start of the European session.
The Euro is well supported by coronavirus statistics. Covid flare ups in Europe have been small and quickly brought under control.
Broadly speaking, recent data has also been supportive of the common currency. Although German ZEW sentiment data, released in the previous session, showed that investor sentiment dipped in July, highlighting the rocky road to economic recovery which lays ahead.
There is no high impacting Eurozone data due to be released today. Investors are looking ahead to the EU summit on Friday. Questions remain over whether the EU will be able to reach an agreement over the covid-19 recovery fund. Failure to do so could drag the Euro lower
The US Dollar is trading on the back foot as investors sell out of the safe haven in search of riskier assets and currencies.
Risk appetite has surged on vaccine news. Moderna Inc a US biotech company reported that its covid-19 vaccine candidate produced a robust immune response in all 45 patients in its early stage human trials in a peer reviewed journal. Importantly the vaccine was well tolerated without safety issues. The findings support further development of the vaccine with Phase 3 trials set to begin later this month.
A vaccine is without doubt the quickest and surest way for the global economy to bounce back and avoid a deep recession. As a result, investors are particularly sensitive to vaccine development.
Whilst vaccine developments are boosting risk sentiment, rising US – Chinese tensions are acting as a cap on risk sentiment. President Trump has ordered the removal of Hong Kong’s special status in retaliation of China’s national security law. Adding to geopolitical tensions the UK has also announced the ban of Huawei equipment by 2027.
