EUR/USD Exchange Rate Falls on Concerns Over Eurozone Economy
The EUR/USD exchange rate fell by -0.5% as the outlook for the Eurozone’s economy remains shaky, with fears of a possible double-dip recession weighing on the single currency. The pairing is currently fluctuating around $1.175.
Chris Williamson, the Chief Business Economist at HIS Markit, recently commented:
‘With lockdown measures being tightened, it is becoming increasingly hard to see how the eurozone economy will avoid falling back into decline. For all countries, the outlook has grown increasingly dark.’
Meanwhile, the German and French lockdown has left many EUR investors jittery, with the two largest economies in the Eurozone likely to suffer from the closure of many businesses.
Yesterday also saw the release of Germany’s latest ZEW Survey of Economic Sentiment, which undercut forecasts and slipped to 29.
Achim Wambach, the President of the ZEW Institute, commented on the data:
‘Financial experts are concerned about the economic impact of the second wave of Covid-19 and what this will entail.’
US Dollar (USD) Edges Higher Despite Slip in Safe-Haven Demand
The US Dollar has suffered from a sell-off this week following the pharmaceutical company Pfizer’s announcement of 90% success in its Covid-19 vaccine trials.
As a result of this announcement, safe-haven demand slipped for the ‘Greenback’ on growing hopes for the global economy’s recovery.
Today US markets are close in honour of Veterans Day, an American Bank Holiday.
Meanwhile, US political developments remain uncertain, with US President Donald Trump still unwilling to concede Democrat Joe Biden’s winning of the 2020 elections.
However, with Joe Biden highly likely to become the next US President in January, risk-sentiment has improved, dragging down demand for the US Dollar.
Kit Juckes, an analyst at Société Générale, explains:
‘At least the market has a narrative: A Democrat President who doesn’t control the Senate, will be less combative on trade, but will be more limited where fiscal policy is concerned. This leaves a bigger role for the Federal Reserve, which means even lower rates for longer, even more QE for longer. So the dollar is weaker, spreads are tight, equities have rallied around the world this week and volatility is (even) lower than it was.’
EUR/USD Outlook: US Jobs Data in Focus
US Dollar traders will be awaiting tomorrow’s release of the latest US initial jobless claims figure for November.
Any significant rise in unemployment throughout America would further bolster demand for the ‘Greenback’ as the outlook for the world’s largest economy deteriorates.
Tomorrow will also see the release of the latest US inflation data. Again, any deterioration could bolster demand for the risk-averse USD.
Euro traders will continue to monitor Europe’s Covid-19 crisis. If this threatens to derail the Eurozone’s economy, then the EUR/USD exchange rate would fall.