EUR/USD Exchange Rate Rangebound, German Recession Fears Weigh on Euro
The Euro US Dollar (EUR/USD) exchange rate held steady today, with the pairing currently trading around $1.08 after February’s German IFO business climate report beat forecasts and rose from 96 to 96.1.
However, Carsten Brzeski, Chief Economist at ING Germany, warned:
‘We would warn against reading too much into single indicators. Being an open economy, Germany is clearly bouncing between many external developments. While some relief from trade argued in favour of a bottoming out of the economy, structural challenges, as well as the impact from coronavirus, are throwing another spanner in the works.’
With Germany being the Eurozone’s powerhouse economy, Euro (EUR) traders are becoming increasingly jittery on the prospect of Germany’s industrial sector seeing a recession later on this year.
The EUR/USD exchange rate is expected to remain subdued as Euro investors keep a close eye on Europe’s developing coronavirus (Covid-15) epidemic, following reports that cities in Northern Italy have been quarantined to prevent the spread of Covid-15.
USD/EUR Exchange Rate Steady, US Economic Data Disappoints
The US Dollar (USD) failed to gain on the single currency following today’s release of January’s Chicago Fed National Activity Index, which failed to uplift the ‘Greenback’ as it increased from -0.51 to -0.25.
This follow’s Friday’s poor US economic data, which has left some US Dollar (USD) traders pricing in a possible rate cut from the Federal Reserve.
Chris Williamson, Chief Business Economist at HIS Markit, commented:
‘With the exception of the government-shutdown of 2013, U.S. business activity contracted for the first time since the global financial crisis in February. Weakness was primarily seen in the service sector, where the first drop in activity for four years was reported, but manufacturing production also ground almost to a halt due to a near-stalling of orders.’
The US Dollar is also failing to benefit from its safe-haven status today, with ‘Greenback’ traders becoming increasingly concerned that a slowing Chinese economy could have a negative impact on the US economy in the near-term.
EUR/USD Outlook: Eurozone’s Inflation Data in Focus
Euro (EUR) investors will be looking ahead to tomorrow’s release of the Eurozone’s core preliminary inflation report. Any signs of improvement in the bloc’s inflation would provide a boost for the EUR/USD exchange rate.
Tomorrow will also see the release of the Eurozone’s unemployment rate figure for February. An improvement in the Eurozone’s employment sector would prove EUR-positive.
The US Dollar (USD) could benefit from its safe-haven status tomorrow if China’s coronavirus fears continue to increase, as this would continue to limit the appeal of risk-correlated currencies and have investors seeking out the safe-haven ‘Greenback’.
