The European currency hit a two-year high against the greenback since Tuesday.

Driven by the 750 billion euro recovery fund adopted on Tuesday, the European currency continues to rise. It broke above the $1.16 threshold it hadn't reached since the summer of 2018. "I still have reservations about the euro's reaction to the stimulus deal," writes Kit Juckes, head of forex research at SG CIB, who sees the movement of a slightly stronger euro more as indicative of an overall weaker dollar: "The powerful actions of the Fed since March, the general cut in rates Americans, the (downward) convergence of growth and political uncertainty a few months before the elections have argued for a weaker dollar for some time, but the market had no reason to buy other currencies until the."

Rise in safe havens

The euro-dollar had started this movement at the end of May. “Investors, in particular companies, have since been diversifying their cash investments even more towards the euro with a less penalizing rate differential than a few months ago, specifies Guillaume Dejean, specialist analyst at Western Union Business Solutions. This is the first stage of a take-off that is somewhat reminiscent of 2017 (euro-dollar at 1.25), with the difference that, at the time, they anticipated rate hikes in the euro zone. The rest of the movement remains uncertain, as do the side effects of the crisis and the pandemic.” Witness, despite the optimism of the equity markets, the rise in safe havens such as gold or the Swiss franc, on which the euro has also lost some ground since June (to 1.07 Thursday).

“The European Central Bank (ECB) is therefore not afraid of it in the short term, especially since the euro remains far from its fundamental valuations (rather above 1.20 dollar), even if a currency strong would slow the recovery of inflation in the medium term”, continues Guillaume Dejean.

The European currency, which remains well placed against the pound sterling around 0.91 (against 0.83 in January), was not among the ten strongest gains of the week, the greenback continuing to rise. weaken with a DXY index now around 95, a level previously reached on March 9 before rebounding to 106 in late March-early April. All eyes are on the United States and the prospect of a new support plan of 1,000 billion without which the economic reality (unemployment, retail sales) could come out even worse.