EUR/USD Exchange Rate Steady as Eurozone Trade and Italian Inflation Data Disappoints
The Euro to US Dollar (EUR/USD) exchange rate held steady today, with the pairing currently fluctuating around $1.12.
The Euro (EUR) failed to gain on the ‘Greenback’ after this morning saw the release of the Eurozone’s non-seasonally adjusted trade balance figure for April, which fell below forecasts from €2.82 billion to €2.9 billion.
Analysts at Reuters commented:
‘[The Eurozone’s] trade surplus plunged year-on-year in April as pandemic lockdowns of economies around the world slashed trade volumes,’
‘Exports of Europe’s biggest exporter Germany plunged by almost a quarter month-on-month and by more than a third France and Italy.’
Meanwhile, Italy’s inflation data for May fell below forecasts today, with the month-on-month report slipping from -0.1% to -0.2%.
Nevertheless, EUR investors are feeling somewhat more optimistic after analysts said that Germany – the Eurozone’s largest economy – was on the road to recovery. The reopening of EU borders has been a positive form of ‘second stimulus’.
DIHK president Eric Schweitzer commented:
‘The opening of the European borders can also provide stimulus worldwide — so that international trade can get going again and secure prosperity and jobs in Germany.’
US Dollar (USD) Steady as Investors Return to Safe-Haven Currencies
The US Dollar (USD) has benefited from a sell-off of riskier assets today, with investors instead flocking to safe-havens like the ‘Greenback’. This follows reports that Beijing had experienced an increase in Covid-19 cases, leaving markets concerned that China could be seeing the beginning of a second wave.
Shen Jianguang, online retailer JD.com Inc.’s chief economist also complained:
‘The lack of demand is the main problem for the Chinese economy right now.’
Instead, many USD investors are looking ahead to tomorrow’s speech by Jerome Powell, the Chairman of the Federal Reserve.
However, after the Fed’s warning that there is a ‘long road’ ahead for economic recovery, we could see Mr. Powell being notably dovish. As a result, ‘Greenback’ investors are remaining cautious.
The twice-yearly US Monetary Policy Report stated:
‘Unlike past recessions, services activity has dropped more sharply than manufacturing – with restrictions on movement severely curtailing expenditures on travel, tourism, restaurants, and recreation – and social-distancing requirements and attitudes may further weigh on the recovery in these sectors’
Consequently, we could see the US Dollar’s gains being short-lived as the world’s largest economy continues to grapple with the fallout from the coronavirus crisis.
EUR/USD Outlook: Could Positive US Retail Sales Data Boost the Greenback?
Euro (EUR) investors will be looking ahead to tomorrow’s release of Germany’s ZEW survey of economic sentiment for June. However, if this confirms consensus and rises to 60, then we could see the single currency rise.
Tomorrow will also see the release of Germany’s inflation data for May. However, with the figure expected to hold at 0.5% year-on-year, we could see the EUR/USD exchange comprised as the Eurozone’s largest economy fails to make steady improvement.
Meanwhile, we could see the EUR/USD exchange rate fall if US retail sales or May show any signs of improvement. With the control group figure expected to rise by 3.8%, then we could see the ‘Greenback’ take the upper hand.