EUR/USD Exchange Rate as Eurozone Suffers from Pronounced Decline in GDP
The Euro to US Dollar (EUR/USD) exchange rate held steady today, with the pairing currently trading around $1.18.
The Euro (EUR) failed to make any gains against the US Dollar (USD) following today’s release of the Eurozone’s flash GDP figure for the second quarter. The data confirmed fears and plummeted by 12.1%.
The Federal Statistics Bureau commented on the data:
‘[This is] the steepest decline since quarterly GDP calculations for Germany began in 1970… even more pronounced than during the financial market and economic crisis.’
In other Eurozone economic news, today saw the employment change figure for the second quarter fall below forecasts by -2.8%. Consequently, EUR investors have become more cautious about the bloc’s economic recovery from the Covid-19 pandemic.
US Dollar (USD) Steady as Strong US Jobs Data Weighs on the Safe Haven Dollar
The US Dollar (USD) held steady against the single currency today as positive risk sentiment continues to hold back gains for the safe haven ‘Greenback’. This follows stronger-than-expected US initial jobless claims, which showed a marked improvement in America’s employment situation.
In other US economic news, today will see the release of the flash Michigan consumer sentiment index for August. If this continues to fall, however, we could see the US Dollar benefit from concerns over the world’s largest economy’s recovery.
Today will also see the release of the US retail sales figure for July. However, with the figure expected to ease from 7.5% to 1.9% month-on-month, we could see the USD/EUR exchange rate rise.
Meanwhile, concerns continue to grow over the US stimulus package following President Donald Trump’s accusation that congressional Democrats had refused to negotiate on a coronavirus aid package.
Amo Sahota, executive director at currency advisory firm Klarity FX in San Francisco, commented:
‘The stalemate over the stimulus package is troubling. Sticking more band-aid over it, which is what the administration is trying to do right now, is not enduring.’
EUR/USD Outlook: Could US-China Trade Tensions Boost Safe-Haven Demand for the ‘Greenback’?
Euro (EUR) investors will be looking ahead to Monday’s Eurogroup meeting. Any signs of improvement in the Eurozone’s integrity would prove EUR-positive.
Monday will also see the release of the French business climate in manufacturing figure for August. If this shows any marked increase, then we could see the EUR/USD exchange rate edge higher.
However, the EUR/USD exchange rate will continue to be driven by global risk sentiment. If US-China trade tensions continue to escalate, however, we could see the ‘Greenback’ rise as safe-haven demand returns.