Euro US Dollar (EUR/USD) Exchange Rate Falls as Germany to Plunge into Recession
UPDATE: The Euro US Dollar (EUR/USD) exchange rate fell by around -0.7% this morning, leaving the pairing trading at around $1.1068.
The Euro remained under pressure after Germany’s council of advisors warned that the output in the country may shrink by around 5.4% this year.
They also added that the coronavirus outbreak has made a recession for the bloc’s largest economy inevitable.
In the report, the advisors noted:
‘The coronavirus outbreak has stopped the incipient recovery. The German economy will shrink significantly in 2020.’
Euro US Dollar (EUR/USD) Exchange Rate Slides as US Emerges at New Coronavirus Epicentre
The Euro US Dollar (EUR/USD) exchange rate slumped by around -0.5% this morning, leaving the pairing trading at around $1.1083.
As coronavirus lockdowns tightened across the world, investors flocked back to the safety of the US Dollar, bracing for a long period of uncertainty.
Commenting on the Dollar’s recent rebound, Bank of Singapore currency analyst Moh Siong Sim noted:
‘Now that the [Dollar] funding pressure is easing somewhat, the focus is pretty much shifting towards assessing the damage.
‘And there, the viral infection rate is still up in the air, [and] it’s a bit of risk-aversion.’
The coronavirus pandemic remained the main catalyst for movement of the pairing, as the global death toll neared 34,000.
The United States emerged as the new epicentre of the virus, with over 137,000 cases, causing risk appetite to slump.
According to analysts from National Australia Bank:
‘Risk aversion is likely to stay elevated with the U.S. the epicentre of Covid-19.’
Euro (EUR) Falls as Confidence Declines in All Sectors of Eurozone Economy
On Monday, data revealed that business confidence in the Eurozone slumped in March.
Economic sentiment in the bloc suffered its steepest monthly decline this month, as coronavirus took its toll.
Confidence declined in all sectors of the bloc’s economy, with many suffering declines before the strict lockdowns were in place.
This was the largest monthly fall in sentiment since records began in 1985, leaving the figure at its lowest level since September 2013.
Consumer confidence plummeted to -11.6, weighing on the single currency and sending it lower against the Dollar.
However, the European Commission noted that its data may be less accurate than usual as the fieldwork essentially stalled due to containment measures which were designed to help stem the spread of Covid-19.
Euro US Dollar Outlook: Coronavirus and Eurozone Inflation in Focus
Looking to Tuesday, the Euro (EUR) could suffer further losses against the US Dollar (USD) following the release of Eurozone inflation data.
If March’s flash inflation rate disappoints, it will leave the single currency under pressure.
Added to this, coronavirus is likely to remain the main catalyst for movement of the pairing.
If traders continue to flock to the safety of the ‘Greenback’, the Euro US Dollar (EUR/USD) exchange rate will slump further.