EUR/USD: Extraordinary conditions to continue

Coronavirus is spreading and so are fears of the severe economic fallout as investors are rotating out of stocks and into bonds. This crash in returns on US long term borrowing is weighing heavily on the dollar, pushing EUR/USD close to 1.15, Yohay Elam from FXStreet briefs.

Key quotes

“In the US, the number of cases climbed to 566 with 22 mortalities. While the Federal Reserve cut rates and will probably do more, the government is seemingly moving slowly.” 

“When the US takes more action – potentially by discouraging travel – the greenback may further fall. PIMCO, a global investment management firm, now foresees and outright the US recession.”

“The eurozone may also enter a recession, but the common currency is rising partly due to the inability of the European Central Bank to act.”

“The German government has room to lift the euro by opening its purse strings. German Chancellor Angela Merkel has said the government will provide high liquidity to companies.” 

“The key to further gains for the euro – regardless of the dollar – is Merkel taking advantage of the crisis to change policy.”