Euro US Dollar (EUR/USD) Exchange Rate Slumps as US Ends Historic 113-Month Employment Growth
UPDATE: The Euro US Dollar (EUR/USD) exchange rate continued to fall by around -0.6% on Friday afternoon, following the US payroll data. This left the pairing trading at around $1.0785.
Data revealed that the United States shed jobs in March, ending a historic 113 month run of employment growth.
The US Labor Department showed employers cut 701,000 jobs in March, sending the country’s unemployment rate from 3.5% to 4.4%.
Commenting on this afternoon’s data, Chris Rupkey, chief economist at MUFG said:
‘The economy has fallen into the abyss. Everywhere you look Washington and state governments were not prepared for the rapid spread of the virus and the devastating damage that would be done to the economy if businesses were shut down and workers sent home.’
However, the exact figures are unclear, as Bank of America Securities US economist, Michelle Meyer notes:
‘The April report should better reflect the severity of the recession, though the exact numbers are hard to pin down. Businesses that have closed won’t be responding to the survey.’
Euro US Dollar (EUR/USD) Exchange Rate Slumps on US Recession Fears
The Euro US Dollar (EUR/USD) exchange rate slumped by around -0.5% on Friday. This left the pairing trading at around $1.0797.
Risk appetite slumped this morning as the US economy likely shed a record number of jobs in March. The spread of the coronavirus pandemic left many Americans unable to work.
Traders flocked to the safety of USD as measures to control the spread of the virus hurt businesses and factories. This confirmed that the US economy is sliding into a recession.
On Thursday, the Dollar rose to the highest level in two weeks against EUR. This was after crude oil prices jumped by the largest-ever daily rise.
Added to this, risk appetite was battered after the United States reported weekly jobless claims soared to 6.6 million.
Commenting on this, Seema Shah, chief strategist at Principal Global Investors in London said:
‘Rising jobless numbers suggest that productive capacity is being eroded.
‘So when self-isolation measures are eventually lifted, economic activity will take that much longer to get back on its feet. The chances of a V-shape economic recovery are fading.’
Euro (EUR) Slides on Record Low German Services PMI
The single currency fell after Germany’s services PMI revealed a record drop in activity due to the coronavirus outbreak.
March saw both a record slump in activity, employment and new business, while business confidence plummeted to a historic low.
Germany’s services PMI fell from February’s 52.5 to 31.7 in March. This was the steepest fall in activity since the survey began in 1997.
This also eclipsed the previous record low of 41.3 in February 2009, which sent EUR lower.
Commenting on this morning’s data release, Markit’s Principal Economist, Phil Smith noted:
‘The unprecedented drop in services business activity in March makes the impact of the COVID-19 pandemic and resulting efforts to contain the spread of the virus all too clear. The damage to the economy has been abrupt and widespread, with those sectors hit particularly hard by social distancing and other containment measures, such as hotels and restaurants, coming to a complete standstill.
‘The extent of the job losses highlighted by the survey data mean we can expect to see the first discernible increase in Germany’s unemployment rate since the global financial crisis. The hope is, however, that extensive use of the government’s short-time work scheme can save some jobs that would have otherwise been lost and support incomes during the downturn.’
Euro US Dollar Outlook: US Non-Farm Payrolls in Focus
Looking ahead to this afternoon, the US Dollar (USD) could extend its gains against the Euro (EUR) following the release of US nonfarm payrolls figures.
With data showing that a record 10 million Americans have filed for unemployment in the final two weeks of March, it is likely today’s data will also disappoint.
Risk appetite will suffer if statistics show that the economy has lost more jobs than expected. This would provide further evidence the US economy is falling into recession. Dampened risk sentiment will send the Euro US Dollar (EUR/USD) exchange rate lower.