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EUR/USD: Risk recovery could weigh over the common currency

  • EUR/USD could be offered amid risk recovery in the financial markets. 
  • Speculation about coordinated easing by the major central banks has put a bid under the risk assets. 
  • Euro drew haven bids during last week's sell-off. 

EUR/USD may come under pressure as the risk sentiment is looking to stabilize on speculation about coordinated policy action by major central banks

Coordinated easing

Bill Nelson, chief economist at a US bank lobby and a former Federal Reserve (Fed) insider, said on Sunday that major central banks may deliver a coordinated global interest rate cut on Wednesday, similar to the one executed at the height of the crisis in October 2008 by the Fed and five other central banks.

Further, the Bank of Japan governor Haruhiko Kuroda was out on the wires in Asia stating that the central bank will take necessary steps to stabilize markets jolted by the
coronavirus outbreak. Kuroda's comments bolstered expectations for coordinated easing, helping the stock markets regain some poise, despite the weaker-than-expected China Caixin manufacturing PMI number. 

At press time, major indices like Japan's Nikkei and South Korea's Kospi, are flashing green. These indices were reporting over 1% losses in early Asia. Meanwhile, the Shanghai Composite is also up more than 1%, while the futures on the futures on the S&P 500 are currently adding 0.5%. 

It's worth noting that the market thinks the Fed would cut rates by 25 basis points in March and deliver another cut in April. The Reserve Bank of Australia is also expected to do the same. 

The risk recovery could continue in Europe on dovish central bank expectations. As a result, the single currency may run into offers. After all, the EUR found haven bids and EUR/USD rose from 1.0805 to 1.1054 during last week's risk-off moves in the global equities. 

EUR/USD is currently trading at 1.1049, having hit a high of 1.1074 in Asia. On the data front, Germany will release the final Markit Manufacturing PMI for February at 08:55 GMT. That will be followed by the Eurozone Markit Manufacturing PMI for February. Across the pond, the US will release the ISM Manufacturing PMI (Feb) at 15:00 GMT. 

Technical levels

 

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