EUR/USD Exchange Rate Steady as EC Downgrades Economic Forecasts for France, Spain, and Italy
The Euro to US Dollar (EUR/USD) exchange rate held steady today, with the pairing currently fluctuating around $1.12.
The Euro (EUR) struggled against many of the major currencies today after the European Commission (EC) announced that France, Spain, and Italy could face desperately deep recession later this year.
The EC warned:
‘Because the lifting of lockdown measures is proceeding at a more gradual pace than assumed in our Spring Forecast, the impact on economic activity in 2020 will be more significant than anticipated.’
As a result, the Euro (EUR) has suffered from an increasingly dark outlook for the Eurozone’s economy.
Meanwhile, today saw the release of Germany’s industrial production gauge for May, which edged higher from -17.5% to 7.8% month-on-month.
Nevertheless, with the Eurozone’s powerhouse economy continuing to struggle this failed to boost the EUR/USD exchange rate.
Jack Allen-Reynolds, senior Europe economist at Capital Economics, was more optimistic, however:
‘[W]ith retail sales rising more rapidly, overall economic activity is picking up a little more quickly than we assumed.’
‘There is sure to have been another increase in overall industrial production in June as demand recovers and manufacturers adjust to physical distancing rules. That said, we suspect that output will have remained well below normal levels.’
US Dollar (USD) Steady as Risk Sentiment Improves
The US Dollar (USD) failed to gain on the Euro (EUR) today as risk sentiment has continued to improve despite rising fears over a possible second wave of the coronavirus.
Stephen Gallo, European head of strategy at BMO Financial Group, commented that the rally in risky assets was owed in ‘mainland China equities.
‘The only caveat is that China’s economy not driven purely by free-market forces. But if regulators in China are engineering a stronger equity market, it can still feed through to the rest of the world.’
As a result, markets are becoming more optimistic that China – the world’s second largest economy – could on the road to recovery. This has seen many investors flock from safe havens like the US Dollar and return to riskier assets.
In US economic news today saw the release of May’s US JOLTS job openings figures, which beat forecasts and rose to 5,397 million. As a result, some ‘Greenback’ investors are becoming more optimistic about the world’s largest economy’s recovery in the months ahead.
EUR/USD Outlook: Could the ‘Greenback’ Rise on Fears of a Possible Second Wave of the Coronavirus?
Euro (EUR) investors will be looking ahead to tomorrow’s European Commission Economic Growth Forecasts. Any further signs of dovishness could drag down the single currency.
Tomorrow will also see a speech by Luis De Guindos, the European Central Bank’s (ECB) Vice President. Again, if the ECB is notably downbeat in its analysis of the Eurozone’s economy, we could see the EUR/USD exchange rate suffer.
USD investors will be looking ahead to tomorrow’s release of the US MBA Mortgage Applications figure for July.
The EUR/USD exchange rate will likely slip this week with investors continuing to seek out the ‘Greenback’ amid fears of a possible second wave of the coronavirus.
