Euro US Dollar Exchange Rate Tumbles despite Forecast-Beating Eurozone GDP
Investors continued to sell the Euro US Dollar (EUR/USD) exchange rate today. As Eurozone coronavirus jitters persist, the Euro (EUR) is recoiling from its best levels while its rival the US Dollar (USD) rebounds from its lows.
Since hitting impressive highs in January, EUR/USD has been gradually trending lower in recent weeks. Last week saw EUR/USD slip from the level of 1.2171 to 1.2137 throughout the week.
EUR/USD has seen even sharper losses this week already though, with the pair losing over half a cent yesterday and falling even further today.
At the time of writing on Tuesday, EUR/USD is trending near a low of 1.2027. Not only is this around a cent below the week’s opening levels, it is also the pair’s worst level in two months, since November.
Euro (EUR) Exchange Rates Fail to Recover despite Forecast-Beating Eurozone GDP
Today saw the publication of the Eurozone’s key Q4 2020 Gross Domestic Product (GDP) growth rate report. Though still a gloomy result, the quarterly rate came in at –0.7% rather than the expected -1.0%, and the yearly rate printed at –5.1%.
Despite these stronger than expected growth results though, concerns that the Eurozone’s economic activity will be even worse in early-2021 weighed on the Euro today. This made it easier for its rival the US Dollar to climb against it.
Investors are concerned that the Eurozone is headed for a double-dip recession. The dire German retail sales report seen yesterday continues to weigh on the Euro as well.
US Dollar (USD) Exchange Rates Up on Rival Weakness
Investors bought the US Dollar higher against its rival the Euro today. The two biggest-traded currencies often see a negative correlation, so the US Dollar often gains when the Euro falls and vice versa.
The US Dollar has seen months of weak performance on global economic recovery hopes, but recently investors have been buying the currency back up from its lows.
Even though markets remain fairly optimistic on economic recovery, the US Dollar is benefitting from Euro weakness and profit taking today.
Euro US Dollar (EUR/USD) Exchange Rate May See More Short-Term Losses
Unless key Eurozone data starts to show more of a turnaround, the Euro to US Dollar exchange rate could be in for more losses over the coming week or so.
Wednesday will see the publication of some key ecostats. Non-manufacturing PMIs for both the Eurozone and US will be published throughout the day.
If the Eurozone services PMI falls short, investors are likely to remain fairly bearish on the Euro. Strong US non-manufacturing PMI data could help the US Dollar to extend its current recovery rally against the shared currency.
Key US Non-Farm Payrolls data due on Friday could also influence the Euro to US Dollar exchange rate.
However, some analysts warn that weakness on the Euro may be limited. According to Claire Dissaux, Head of Strategy at Millennium Global, the longer term Euro outlook is more optimistic still:
‘The short-term outlook is relatively more negative for Europe than the US, but the longer term outlook is more constructive,’
Overall, the Euro US Dollar (EUR/USD) exchange rate may see further losses in the coming week, but there is potential for the pair to gain again as well.