EUR/USD Exchange Rate Edges Higher as US Hit By Dire Growth Report
The Euro to US Dollar (EUR/USD) exchange rate rose by 0.2% today after the flash US GDP report for the first quarter plummeted to a worse-than-expected -4.8%. The pairing is currently trading around $1.08.
The US Dollar (USD) struggled today after the preliminary US growth figure for Q1 revealed the nation’s biggest contraction since the Great Recession.
Spencer Hill, an economist at Goldman Sachs, was even more pessimistic, saying:
‘We believe economic reality during the quarter was even worse.’
‘Larger than usual revisions to growth data are common in recessions and other periods of high economic volatility.’
https://twitter.com/RemiGMI/status/1255476580773695490
The ‘Greenback’ is also suffering from a slump in safe-haven demand today, with risk sentiment riding high as Europe and Australia plan to reopen their economies next month.
Today also saw the news that Gilead Sciences announce that it is seeing positive data emerging from its study of Remdesivir, the possible treatment drug for Covid-19. Consequently, this boost risk sentiment and left safe-haven currencies wanting.
However, following today’s US economic data, USD investors are becoming increasingly concerned that America could be beginning to see the start of an unprecedented recession.
Euro (EUR) Rises as Despite Weak German Inflation Data
The Euro (EUR) rose despite Germany’s flash Harmonised CPI report for April falling from 1.3% to 0.8%, well below the European Central Bank’s (ECB) target.
Analysts at Reuters commented:
‘Inflation slowed further in several German states in April … suggesting the national reading will stay well below the European Central Bank’s target and pose no threat to stimulus plans to soften the impact of the coronavirus pandemic.’
However, the Euro (EUR) has been boosted by growing hopes that both Spain and France could recover their economy. Both nations are planning to reopen their economies as early as next month.
French Prime Minister Edouard Phillippe told the National Assembly in Paris:
‘We must protect the French without immobilising France to the point of collapse.’
‘[However, a] little too much carelessness and the epidemic will start again, a little too much prudence and the whole country will sink. The objective of the strategy I have just set out is to allow us to hold this ridgeline.’
EUR/USD Outlook: Could Poor Eurozone Growth Send the Single Currency Downward?
Euro (EUR) investors will be awaiting tomorrow’s interest rate decision from the European Central Bank (ECB). Any dovish commentary about the bloc’s economy going forward would prove EUR-negative.
Tomorrow will also see the release of the Eurozone’s flash GDP data for the first quarter. If this falls considerably below forecasts, then we could see the single currency plummet against the US Dollar.
Meanwhile, US Dollar (USD) investors will be keeping a close eye on the US Initial Jobless Claims report for April. If American unemployment continues to rise, then the US Dollar’s gains could be compromised.
The EUR/USD exchange rate will also continue to be driven by Covid-19 developments this week. If Europe continues to open its economies, the Euro could continue its ascent.