June 17, 2020 - Written by John Cameron
STORY LINK Euro to US Dollar (EUR/USD) Exchange Rate Falls as Eurozone Inflation Figures Fall to Four-Year Lows
EUR/USD Exchange Rate Sinks as Eurozone Economic Data Disappoints
The Euro to US Dollar (EUR/USD) exchange rate fell by -0.3% today, with the pairing currently trading around $1.122.
The Euro (EUR) suffered today following the release of the core Eurozone inflation data for May, which saw the year-on-year figure hold at 0.9%, while the month-on-month figure remained at 0%.
Eurostat also indicated that the bloc’s construction output had fallen by 14.6% in April following a 15.7% drop in April.
‘Overall, production in construction in the euro area and EU has fallen to the lowest level recorded since the start of the series in 1995.’
As a result of the Eurozone’s inflation hitting a four-year low, however, EUR traders are becoming more cautious about the bloc’s ability to recover in the months ahead.
Today also saw the release of Italy’s industrial sales figures for April, which plummeted by -32.2%. This follows plummeting EU new car sales, which halved during the easing the Euro-areas lockdown easing.
Claus Vistesen at Pantheon Macroeconomics said:
‘We need to see some Q3 data to get a clearer picture how quickly, if at all, demand is rebounding.’
‘We think the year-over-year rate will gradually swing towards zero and beyond over the next six months, but the year as a whole is ruined for the eurozone auto sector.’
US Dollar (USD) Edges Higher as Surging Retail Sales Buoy ‘Greenback’
The US Dollar (USD) edged higher today despite worse-than-expected US building permits figures, which fell below forecasts at 1.22 million. However, this was an improvement on the previous month’s figure of 1.066 million.
Today also saw the release of the US housing starts figure for May which also fell below forecasts at 0.974 million.
However, following yesterday’s stellar US retail sales report, which surged to a record 17.7%, ‘Greenback’ investors are becoming more optimistic about America’s economic recovery.
Nevertheless, Tuesday’s comments from the Federal Reserve Chairman Jerome Powell have weighed down the US Dollar today.
Mr Powell said:
‘Much of that economic uncertainty comes from uncertainty about the path of the disease and the effect of measures to contain it. Until the public is confident that the disease is contained a full recovery is unlikely.’
As a result, the US Dollar (USD) has benefited from dampening risk sentiment, with investors seeking out safe-haven currencies as the global economic situation remains uncertain.
EUR/USD Outlook: Could Dampening Risk Sentiment Increase the US Dollar?
US Dollar (USD) investors will be looking ahead to tomorrow’s release of the US initial jobless claims figures for June. If US unemployment continues to grow, we could see USD shed some of its gains.
The US Dollar (USD) will likely continue to be buoyed by slipping risk sentiment this week, with investors increasingly concerned about the global economy as fears of a second-wave continue to linger.
The EUR/USD exchange rate could continue to sink into Thursday, with growing doubts over the Eurozone’s economic situation weighing down the single currency.
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TAGS: American Dollar Forecasts Euro Forecasts