EUR/USD Exchange Rate Edges Higher on Gloomy US Economic Outlook
The Euro to US Dollar (EUR/USD) exchange rate rose by 0.4% today, with the pairing currently trading around $1.133.
The US Dollar (USD) has suffered today as risk-sentiment has improved despite growing fear over a possible second wave of coronavirus cases in America. Instead investors have weighed hopes in favour of a swift economic recovery despite signs of a resurgence of the pandemic.
Marshall Gittler, head of investment research at BDSwiss, commented that the US Dollar (USD) is ‘generally at the mercy of risk-sentiment – which seems to be taking a turn for the worse’.
He also added:
‘I think in the absence of any news pro-growth news, the virus count will be the one statistic that pops out from everyone’s screens.’
Meanwhile, the ‘Greenback’ is being increasingly compromised by growing doubts over its safe haven status, with the Chinese economy fast improving while the US still faces the prospect of a second wave.
Euro (EUR) Rises Despite Growing Concerns for the Eurozone’s Economic Recovery
The Euro (EUR) edged higher against the ‘Greenback’ today despite concerns that the Eurozone’s economy could be headed for a deeper recession than previously forecast.
Valdis Dombrovskis, Executive Vice President of the European Commission (EC), commented:
‘We continue to navigate in stormy waters and face many risks, including another major wave of infections.’
Meanwhile, the European Commission’s (EC) own report stated:
‘At the global level, the still rising rate of infections, particularly in the US and emerging markets, has deteriorated the global outlook and is expected to act as a drag on the European economy.’
However, due to a general lack of Eurozone economic data, the Euro has instead benefited from safe-haven demand as investors turn away from America’s struggling economy. With the Euro being a direct competitor with the US currency, this has benefited the single currency today.
Nevertheless, the EC’s new forecasts of an 8.7% contraction of the Eurozone’s economy in 2020 has weighed on some of the single currency’s gains. This follows the EC’s warning that the downsides for the economy were ‘exceptionally high’.
EUR/USD Forecast: Could Positive German Data Buoy the Euro?
Euro (EUR) traders will be awaiting tomorrow’s release of Germany’s trade data. If there’s any marked improvement in the Eurozone’s powerhouse economy’s exports, then we could see the EUR/USD exchange rate continue to edge higher.
Meanwhile, US Dollar (USD) investors will be keeping a close eye on US jobs data tomorrow. Any signs of unemployment easing off could benefit the ‘Greenback’.
The US Dollar could also benefit from a deterioration in risk sentiment. If coronavirus cases continue to rise in America, we could see investors flock back to safe haven.
The EUR/USD exchange rate will largely be driven by Eurozone economic data for the rest of the week. Any signs of economic recovery progressing in the bloc would prove EUR-positive.