Euro US Dollar (EUR/USD) Exchange Rate Falls as Traders Worry About the ‘Economic Freeze’
The Euro US Dollar (EUR/USD) exchange rate edged lower this morning, leaving the pairing trading at around €1.0831.
The US Dollar made tentative gains against the single currency this morning despite reports of a success in a coronavirus drug trial and plans to open the US economy boosting risk appetite.
Hopes for a successful Covid-19 treatment boosted risk sentient despite dire economic data released in China at the start of today’s session.
Added to this, data revealing the first slump in Chinese economic growth since records began almost 30 years ago failed to dampen the mood.
While the move weighed on the ‘Greenback’, the US currency was headed for its steadiest week in close to two months.
Commenting on this, Moh Siong Sim, currency analyst at the Bank of Singapore:
‘It’s this divided feeling between wanting to worry about the economic freeze and the hope that things might be re-starting quite soon.
‘We’re stuck in that limbo zone, but it does seem that the infection rate may have hit a peak at a global level […] and if we find a cure, then there’s a cure for the economy as well.’
President Trump: ‘One Careful Step at a Time’ to Re-Open Economy
Meanwhile, while reports the US plans to re-open the country’s economy boosted risk appetite, this did little to buoy the single currency.
On Thursday, US President Donald Trump outlined new guidelines which would allow US states to emerge from the lockdowns in a staggered and three-stage approach.
The process would be subject to states’ discretion and would be dependent on robust virus testing.
Speaking to reporters, President Trump said:
‘We are not opening all at once, but one careful step at a time.’
However, yesterday’s data showed the coronavirus has left 22 million Americans out of work.
Added to this, China’s economy shrank for the first time since at least 1992, although this was not much worse than investors feared.
According to Nathan Chow, senior economist at DBS in Hong Kong:
‘It shows the economy is gradually recovering from the very worst.
‘But I think in the second quarter we will see at most a stabilisation, not a rebound, because cases are still rising for most of China’s trading partners, which will dampen orders going forward. Based on this first-quarter number, I would say the whole year GDP growth would be something around 2%.’
Euro US Dollar Outlook: Coronavirus Pandemic in Focus
Looking ahead to next week, the Euro (EUR) could suffer losses against the US Dollar (USD) following the release of German inflation.
If Germany’s Producer Price Index (PPI) slumps further than expected in March, it will weigh on the single currency.
Meanwhile, investor risk appetite and the coronavirus pandemic is likely to be one of the main drivers in currency markets.
If risk appetite slumps once again as traders fret about the economic impact of the coronavirus, investors will flock to the safety of the ‘Greenback’ and the Euro US Dollar (EUR/USD) exchange rate will slide.