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Mark O' Donnell
 · 
Research Analyst
August 18, 2020
 · 

Strong Bull Interest in the Euro

Strong Bull Interest in the Euro

Everyone has been loving the Euro recently.

Euro against the US Dollar up nearly 12% from its March lows.

The Euro currently sits at a 26 month high at around 1.19 against the U.S. Dollar. Now, it is up almost 12% from its March lows. Everything recently has been compared to how well the Coronavirus response has been in respect of said asset, and the Euro is no exception. The appreciation in the Euro against the U.S. dollar is in a combination of an increase in investor/trader interest in the Euro, alongside the broad weakening of the U.S. dollar.

Weakening of the U.S. Dollar helps boost Euro

The U.S. Dollar has weakened from its “safe haven” all-time high earlier in March. This is due to investors and traders looking for markets elsewhere in the world, alongside being wary of the conditions in the United States. They recorded just under 38,000 new Coronaviruses cases today, with over 5.47 million previously registered Coronavirus cases. Therefore, comparatively, the consensus is that Europe has had a better response to the Coronavirus than the United States. With both continents pushing out trillion-dollar stimulus packages, the difference is the cohesion between the politicians that run the government. The United States government have seen a divide across the aisle on how to proceed with the Coronavirus, while the members of the European state has been relatively United.

Investor sentiment in the Euro is at an all-time high

Regarded as the second world currency, the Euro has taken the front foot on the decline of the U.S. Dollar. Figures from the CTFC collated by the Financial Times show that optimism in the Euro stands at a record high, with net non-commercial positions standing at the highest it has ever been. Furthermore, JP Morgan raised their year-end target forecast for the Euro at 1.20, from a previous estimate of 1.13 against the dollar.

However, some believe the euro bull run is on its last legs

Jane Foley, head of currency strategy at Rabobank in London, suggested that “the CFTC positioning data suggests that the move in the Euro is overstretched,” suggesting a correction may be in place to move higher.

The currency market has been in contrast to how the equity markets have been playing out today. With a further pullback in the U.S. dollar index, down 1.35% over the past five days, the S&P 500 and the NASDAQ closed at all-time highs.

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