EUR/USD Holds Steady Near Two-Month High as Fed Expected to Turn More Dovish Than ECB
Early on Tuesday, the euro is trading somewhat study against the US dollar, holding close to a two-month high over rising expectations for the Fed to turn more dovish than its European counterpart in response to the recent coronavirus outbreak. At the time of writing, EUR/USD is trading around 1.113.
Meeting central banks around the world have confirmed their interest in responding to the the economic risks of the outbreak, with G7 finance ministers and central bank officials scheduled to hold a call later today to discuss implications and a possible response. For now, markets have almost completely priced in a 0.25% rate cut by the Fed this month, which has driven weakness in the US dollar lately.
On the other hand, the ECB has limited room for further easing given that it already holds interest rates in the negative territory. This has helped the euro maintain its strength against the dollar in recent trading sessions.
Meanwhile, expectations for a more aggressive rate cut by as much as 0.50% this month are on the rise, weakening the US dollar index to the lowest level seen in six weeks and driving additional bullishness in EUR/USD.
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