EUR/USD Exchange Rate Falls Despite Gloomy Outlook for the Eurozone’s Largest Economy
The Euro to US Dollar (EUR/USD) exchange rate dipped today, with the pairing currently trading around $1.08.
The Euro (EUR) failed to benefit from Germany’s better-than-expected Consumer Price Index report for April, which rose from 0.3% to 0.4%. Instead, investors are becoming increasingly concerned for the Eurozone’s largest economy, with inflation continuing to fall well below the European Central Bank’s (ECB) target.
Christian Odendahl, a chief economist for the Centre of European Reform, was also pessimistic about the German economy, commenting:
‘The fiscal consolidation over the last 10 years has not increased our ability to weather this crisis. We refrained from going on a massive spending spree or lowering taxes massively. For the health of the European and world economy, we probably should have done both.’
Meanwhile, the Euro (EUR) is being held back by growing fears of the possibility of a second-wave of coronavirus cases in Europe. Any further signs of rising cases within would heighten anxiety over the health of the Eurozone’s economy, which would struggle profoundly should lockdowns harden.
US Dollar (USD) Rises as Safe-Haven Demand Rises Amid US-China Trade Tensions
The US Dollar (USD) edged higher today despite investors begin to seek safe-haven currencies after US-China trade disputes flared up.
US President Donald Trump continued to stoke fires with Beijing, stating he was ‘disappointed in China’. Trump also added that he was prepared to ‘cut off the whole relationship with China’.
As a result, markets have fallen on rising fears that the world’s two largest economies could fall out, leaving the global economy in dire straits as it battles the coronavirus pandemic.
However, today saw the release of the US Initial Jobless Claims report for May, which soared to a worse-than-expected 2,981 thousand. As a result, this has left many ‘Greenback’ traders concerned for the health of the world’s largest economy.
America’s economic outlook is looking increasingly dim as 32 million US citizens filing for unemployment aid since the coronavirus hit.
Neil Birrell, Chief Investment Officer at Premier Miton, commented:
‘Hard on the heels of Jerome Powell’s downbeat comments on the US economy come initial jobless claims that are worse than expectations, although continuing claims are a bit better than thought.’
EUR/USD Forecast: Could the Euro Fall on Weak Eurozone GDP Data for the First Quarter?
The US Dollar (USD) will be driven by global market factors this week. If US-China trade tensions worsen, then we could see the ‘Greenback’ benefit from a surge in safe-haven demand.
US Dollar (USD) investors will also be looking ahead to tomorrow’s flash US Michigan Consumer Sentiment Index for May. However, if this significantly falls below consensus due to the economic pressures of the coronavirus, then we could see the USD’s gains compromised.
Meanwhile, EUR traders will be awaiting tomorrow’s publication of the Eurozone’s flash GDP report for the first quarter. If this confirms forecasts and sinks by -3.8%, then we could see the Euro sink further.