EUR/USD Exchange Rate Sinks as Eurozone Economic Outlook Dims
The Euro to US Dollar (EUR/USD) exchange rate fell by -0.3% today, with the pairing currently trading around $1.173.
The Euro (EUR) suffered today following news that France and Germany – the Eurozone’s two largest economies – are considering new Covid-19 restrictions.
Consequently, EUR has suffered as the Eurozone looks set for further setbacks as the coronavirus continues to spread throughout much of Europe.
Jeffrey Halley, the senior market analyst at OANDA, commented:
‘The Euro will almost certainly come under more pressure, already on the back foot as investors reduce pre-US-election risk. The chill winds would be felt in European equities as well. The fall-out is unlikely to be confined to just Europe.’
In Eurozone economic data, today saw the release of French Consumer Confidence dip from 95 to 94.
But with further restrictions and lockdowns expected, the outlook for the Eurozone’s economy looks increasingly bleak.
US Dollar (USD) Rises as US Stimulus Hopes Fade
The US Dollar (USD) rose today owing to diminishing optimism over the possibility of a pre-US election stimulus package.
President Donald Trump criticised the US House Speaker Nancy Pelosi, hinting that a Covid-19 stimulus package would only arrive after the presidential elections next week.
Mr Trump said:
‘After the election, we’ll get the best stimulus package you’ve ever seen, because I think we’re going to take back the House because of her. I think you have a lot of congressmen and women – Republican – that are going to get elected.’
Consequently, the ‘Greenback’ has been bolstered by safe-haven demand as uncertainty grows ahead of the US elections and Covid-19 cases rise worldwide.
In US economic data, today saw the release of the MBA Mortgage Applications report for October, which rose by 1.7%.
As a result, growing confidence in the US economy – the largest in the world – is clipping some of the demand for the safe-haven currency.
However, this is being off-set by growing concerns over the global Covid-19 pandemic.
EUR/USD Forecast: Could Safe-Haven Demand Boost the ‘Greenback’?
Euro (EUR) investors will be awaiting tomorrow’s interest rate decision from the European Central Bank (ECB).
Although the ECB is expected to hold the rate at 0%, any dovishness about the Eurozone economy would be EUR-negative.
Tomorrow will also see the release of Germany’s Unemployment Rate for October. This is expected to rise by 6.3%.
If this creeps higher, however, then the single currency would suffer.
The US Dollar (USD) will remain sensitive to global Covid-19 developments this week. If global markets become increasingly gloomy, then the safe-haven ‘Greenback’ will edge higher.