Why the Euro (EUR) is the New Safe Haven

The Euro has been gaining decent ground over the past few months, running at three consecutive in the green. At the time of writing; EUR/USD has gained a chunky 4.5%, moving to the highest levels seen since March.

Why is Euro on such a bull run?

  • Containing coronavirus - The Eurozone has been one of the best regions at containing Covid19, to then getting economies back open and running again. Generally quite fast action was implemented by the likes of Italy and Spain when the virus had started spreading, with necessary lockdowns. Quicker responses in comparison to the UK and the United States.

  • ECB support - The European Central Bank (ECB) has been over delivering with much needed stimulus into the bloc, chunky cash injections. As a reminder the bank increased its Pandemic Emergency Purchase Program by 600 billion euros ($686 billion) to 1.35 trillion euros in June. The rate decision is in focus today, where no further action is expected, however we believe they will strongly signal more firepower to come as needed.

  • European Rescue Fund optimism - There is much optimism around the European Rescue Fund of some €750-billion in the form of a reconstruction package. Talks are still dead-locked at present, however an eventual agreement is expected.

Given all the above noted, I believe that this is enough to continue seeing EUR bulls driving higher and the Euro being deemed as safe-haven. Given the troubling situation that remains in the United States, not being able to contain this potential second wave. Investors are likely to seek some safety in the Euro as opposed to the USD.



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