EUR/USD Exchange Rate Retreats on Abysmal German Data
The Euro to US Dollar (EUR/USD) exchange rate has fallen sharply today, in the wake of some much weaker-than-expected economic data from Germany.
At the time of writing the EUR/USD exchange rate is trading at around $1.2084, down roughly 0.4% from today’s opening levels.
Euro (EUR) Slumps Following Record Plunge in German Retail Sales
The Euro (EUR) stumbled out of the gate this morning, following the publication of some abysmal retail sales figures from Germany.
According to data published by Germany’s federal statistics agency, Destatis, sales growth collapsed from a downwardly revised 1.1% to –9.6% in December, well below expectation for a more modest contraction of 2.6% and also the largest fall in sales growth on record.
This plunge is sales growth was unsurprisingly attributed to German Chancellor, Angela Merkel’s move to tighten lockdown restrictions across the country, in an effort to curb the spread of coronavirus infections.
With the vast majority of shops forced to close over the crucial holiday period, we caw consumer spending effectively fall off a cliff.
With Merkel recently extending the lockdown measures until at least mid-February, there also seems little chance of sales rebounding at the start of 2021, concerns over which are applying additional pressure to the Euro.
US Dollar (USD) Bolstered by Risk-Off Trade
The US Dollar (USD), meanwhile, is benefiting from the prevailing risk-off mood in markets this morning, which has left investors to favour the safe-haven ‘Greenback’.
This appears driven in part by the ongoing frenzy in stock markets, which appears to have spread to the commodity market this week, as silver prices rocket to an eight-year high.
The uncertainty posed by small army of traders on the WallStreetBets sub-Reddit, to financial markets, has resulted in cautious investors extending their positions in USD.
The fall in risk-appetite is being further reinforced by some underwhelming PMI figures from China, which pointed to a slowing of manufacturing sector activity in the world’s second largest economy at the start of 2021.
EUR/USD Forecast: Strong ISM Manufacturing PMI to Dent the US Dollar?
Still to come today, we have the publication of the latest ISM Manufacturing PMI later this afternoon.
January’s index is forecast to report that activity in the US factory sector remained fairly robust, after rising to a two-year high in December.
The positive reading could help the Euro to US Dollar exchange rate mount a recovery later today, as a strong reading is likely to bolster market sentiment, at the expense of the safe-haven ‘Greenback’.
Meanwhile, the focus for EUR investors will turn to tomorrow’s Eurozone GDP print.
Economists are forecasting growth in the bloc will have contracted again in the fourth quarter of 2020 as most of Europe when back into lockdown as the continent was battered by a second wave of coronavirus infections.
However, with Germany’s recent GDP figures beating forecast, there is also scope for the Eurozone release to print above expectations, an outcome which could help to bolster the Euro.