Euro to US Dollar Exchange Rate Lower as German Recession Fears Mount
Following weeks of deepening German recession speculation and fear, the Euro to US Dollar (EUR/USD) is finally beginning to be hit more directly and has been trending lower this week. This is despite yesterday’s rise in US recession fears.
Since opening this week at the level of 1.2000, EUR/USD has briefly jumped to a monthly high of 1.1308 before spending most of the week edging lower.
Overnight, EUR/USD touched on its worst level in almost a fortnight, 1.1133, before edging slightly higher and trending closer to the level of 1.1150 at the time of writing.
As both the Euro (EUR) and US Dollar (USD) are being weighed by rising recession fears, the exchange rate’s movement has been limited.
Euro (EUR) Exchange Rates Tumble on Rising German Recession Fears
Much of the Euro’s recent weakness has been more due to weakness in rivals like the Pound (GBP) and US Dollar than its own, domestic support.
In fact, German data has continued to cause concern for markets, and weigh on any hopes for resilience in the Eurozone economy.
This week’s German data has only worsened fears that the Eurozone’s biggest economy could be headed towards recession. German wholesale prices and economist sentiment data saw notable contractions.
Germany’s Q2 growth projections were a little better than expected year-on-year, but growth still contracted quarterly.
Analysts don’t believe there is much sign of rebound in Germany’s economic activity. With global trade tensions and growth fears only worsening, analysts increasingly fear the German economy could enter recession in Q3.
US Dollar (USD) Exchange Rates Benefit from Safe Haven Demand
Yesterday, news that the US yield curve had inverted dominated market headlines. In short, this means that markets are becoming less and less confident about the US economic outlook.
Historically though, the yield curve inverting has been seen as a harbinger for a potential US recession. As the US economy is so influential to the global economy, it by extension has caused fears about slowdown in major economies all around the world.
Essentially the yield curve inversion coupled with worsening US-China trade tensions have exacerbated global growth slowdown fears and recession fears.
While markets are of course concerned about the US economic outlook, the US Dollar is still a safe haven currency. As investors flooded out of currencies perceived as risky or trade-correlated, the US Dollar has advanced slightly.
Euro to US Dollar (EUR/USD) Exchange Rate Investors Await Major US Data
The US economic outlook is worsening, as the US yield curve has inverted and Federal Reserve interest rate cut bets continue to rise.
The Euro to US Dollar (EUR/USD) has been trending lower this week on German recession fears, but investors may be more likely to sell the currently resilient US Dollar if upcoming US data disappoints investors.
This afternoon will see the publication of many key US ecostats that could give investors a better idea of how US factory and retail sectors are performing this quarter.
US retail sales from July are likely to be particularly influential. Industrial and manufacturing production stats, as well as business inventories and productivity data could also drive shifts in the US economic outlook.
If the data is concerning, the Euro to US Dollar (EUR/USD) exchange rate could see some late-week gains as the US Dollar tumbles. Tomorrow’s Eurozone trade balance data could also give the Euro some support if it impresses.
