EUR/USD Exchange Rate Falls as Eurozone Economy Falters
The Euro to US Dollar (EUR/USD) exchange rate fell by -0.3% today, with the pairing currently trading around $1.182.
The Euro (EUR) suffered this morning following the release of October’s latest German IFO Business Climate figure, which fell below forecasts from 93.2 to 92.7.
As a result, EUR suffered owing to rising concerns over the health of the Eurozone’s largest economy.
Carsten Brzewski, an analyst at ING, commented on the report:
‘With even more social distancing restrictions on the horizon, there is a significant risk that ‘smart’ lockdowns across Europe turn into more severe ones, which in turn would bring the third quarter rebound to an abrupt halt in the last few months of the year.
‘At face value, today’s Ifo index is not weak enough to fear another collapse of the economy but as all of Europe is in the second wave of the virus, today’s Ifo index definitely marks the end of the rebound and the start of double-dip fears.’
Meanwhile, with Covid-19 cases rising in Spain and across the rest of Europe, EUR investors are remaining cautious as this will further compromise the Eurozone’s economy.
US Dollar (USD) Rises as Safe-Haven Demand Increases as Covid-19 Cases Rise Worldwide
The US Dollar (USD) benefited from dampened risk sentiment today, with investors returning back to the safe-haven ‘Greenback’ as global Covid-19 infection rates continue to soar.
Furthermore, with signs that China is experiencing an increase in coronavirus cases, appetite for risky assets has been compromised as the world’s second-largest economy could suffer a setback.
In US economic news, today saw the release of September’s US New Home Sales figure, which fell below forecasts to 0.959 million.
Lucia Mutikani, an analyst at Reuters, commented:
‘Sales of new U.S. single-family homes unexpectedly fell in September after four straight monthly increases, but the housing market remains supported by record low mortgage rates and demand for more room as the COVID-19 pandemic drags on.’
Added to this, fading hopes of a US stimulus package ahead of US presidential elections has further dampened risk sentiment, strengthening the USD/EUR exchange rate.
EUR/USD Forecast: Could the Single Currency Rise on Brexit Progress?
Euro (EUR) investors will be awaiting tomorrow’s European Central Bank’s (ECB) Bank Leading Survey.
Any indications of a major setback for the Eurozone’s economy would prove EUR-negative.
US Dollar (USD) investors will be looking to September’s US Durable Goods Orders figure.
If this points to an improvement in the world’s largest economy, we could see the ‘Greenback’ suffer as risk-sentiment improves.
The EUR/USD exchange rate could head higher this week, however, if UK-EU Brexit negotiations progress towards a post-Brexit trade deal.