Euro US Dollar (EUR/USD) Exchange Rate Falls as Eurozone’s Private Sector Suffers ‘Shocking’ Decline

EUR/USD Exchange Rate Sinks as German Factory Orders Plummet

The Euro to US Dollar (EUR/USD) exchange rate fell by -0.4% today, with the pairing currently trading around $1.07.

The Euro (EUR) suffered today after March’s German Factory Orders figures plummeted to a worse-than-expected -15.6%. As a result, single currency traders are becoming increasing concerned for the Eurozone’s largest economy’s health going forward.

Today also saw the release of the Eurozone’s final PMI Composite figure for April. The figure showed the bloc’s private sector had slumped to 13.6, down from 29.7 in March.

Chris Williamson, the Chief Business Economist at IHS Markit, described the decline as ‘shocking’, saying:

‘The extent of the euro area economic downturn was laid bare by record downturns in every country surveyed in April, with output falling at unprecedented rates across the region’s manufacturing and services sectors.’

‘With a large part of the region’s economy shut down while COVID-19 infections spiked higher, the economic data for April were inevitably going to be bad, but the scale of the decline is still shocking.’

Meanwhile, the Euro (EUR) remains under pressure after Germany’s top court ruled the European Central Bank’s (ECB) mass bond-buying to stabilize the bloc’s economy as partly in violation of Germany’s constitution. Consequently, this has left many Euro traders eagerly anticipating the ECB’s next move.

US Dollar (USD) Rises Despite US Services Sector Posing Biggest Contraction Since 2009

The US Dollar (USD) rose against the weakened single currency today despite rising global market optimism. Consequently, investors’ safe-haven demand for the ‘Greenback’ has slipped in favour of riskier assets.

The slide in the US Dollar was sparked off by growing optimism for the global economy. Increasingly, large economies like the Eurozone are beginning to reopen their economies following the peak of Covid-19.

Meanwhile, yesterday’s publication of April’s ISM non-manufacturing PMI also dampened appetite for the US Dollar. The figure revealed that the American services sector had slumped deeply into contraction territory from 52.5 to 41.8 due to the coronavirus pandemic.

Anthony Nieves, the Chair of the Institute for Supply and Management, commented:

‘Respondents are concerned about the continuing coronavirus impacts on the supply chain, operational capacity, human resources and finances, as well as the uncertain timelines for the resumption of business and a return to normality.’

Looking ahead, today will see the release of the US ADP Employment Change report for April. If American unemployment continues to soar, then we could see the ‘Greenback’ shed some of its gains against the single currency.

EUR/USD Forecast: Could the Euro Rise as European Countries Reopen their Economies?

Euro (EUR) investors will be looking ahead to tomorrow’s release of March’s German Industrial Production report. If this confirms forecasts and plummets by -7.5%, then we’re likely to see the single currency fall.

Meanwhile, US Dollar (USD) traders will be awaiting tomorrow’s release of May’s US Initial Jobless Claims. However, with America’s unemployment expected to soar, the ‘Greenback’ could likely sink.

The EUR/USD exchange rate could edge higher if the US economic outlook continues to deteriorate. Furthermore, with more Euro-area countries reopening their economies the bloc’s economic outlook is showing signs of improvement.

David Moore

Contact David Moore