EUR/USD Exch Rate Flat on Jobless Claims
The EUR US Dollar exchange rate remained muted this afternoon with the pairing trading on forex at around $1.0980. Millions more have filed for Unemployment in the United States.
Renewed tensions between the U.S. and China weighed on global market sentiment. This offers the safe-haven USD support.
Global risk appetite also suffered as millions more Americans filed for unemployment benefits last week.
Data revealed backlogs of claims continue to clear and complications from the pandemic sparked a second wave of layoffs.
This suggests May could suffer another month of staggering job losses. And this is painting a dire picture of the world’s largest economy.
Glassdoor’s senior economist, Daniel Zhao noted that high unemployment insurance claims bring the total UI claims to 38.6 million. It surpasses yet another historical benchmark.
In only a nine-week period, unemployment claims made during the coronavirus crisis have already exceeded the 37 million claims. It was made over the entire 18 months of the Great Recession.
The coronavirus crisis continues, he said. It continues to inflict swift and deep impacts on the labor market at a near-unprecedented clip.
The EUR Steadies
After four straight days of gains in the FX market, the single currency steadied today. It was fuelled by the optimism of a closer fiscal union in the Eurozone.
This optimism soon fizzled out and risk appetite was hit with increasing US-China trade tensions and weak economic data.
The EUR eased today after fresh PMI data revealed the tremendous impact of the coronavirus on the bloc’s economy.
Flash PMIs improved slightly this month as governments across the bloc eased lockdowns. The numbers were still firmly in contraction territory.
The Eurozone’s PMI composite recovered to 30.5 in May. This was after April saw the bloc’s PMI composite plummet to its lowest reading in the survey’s 22-year history.
Markit’s Chief Business Economist, Chris Williamson noted that the Eurozone saw a further collapse of business activity in May. But the survey at least brought reassuring signs that the downturn likely bottomed out in April.
GDP in Q2 is still likely to fall at an unprecedented rate, down by around 10% compared to the first quarter. The rise in the PMI is adding expectations that the downturn should continue to moderate. This is as lockdown restrictions are further lifted heading into the summer.
All Eurozone countries eased their COVID-19 containment measures to some extent this month. This is helping to moderate the overall rate of economic decline.
EUR US Dollar Outlook on German GDP and Business Climate
Meanwhile, in FX news, the EUR could start next week on the backfoot after the release of final German GDP data.
If Germany’s final growth rate shows the country went into a recession in Q1, the single currency will slide.
Moreover, if the country’s business climate does not rise as high as forecast, EUR will fall.
If Germany’s business climate continues to suffer due to COVID-19, it will send the EUR/USD exchange rate lower.
