Euro Down on Germany’s Gloomy Outlook
The euro stumbled close to a three-year low against the US dollar on Tuesday, with the fx market awaiting figures from Germany’s ZEW survey, which is expected to reveal a huge decline in investor confidence and further support the lack of enthusiasm for Europe’s biggest economy.
The single currency dropped 0.12% to $1.0827 versus the greenback, near its lowest since April 2017. The pair last stood at $1.0831.
Financial markets held on to tight ranges following the US President’s Day holiday on Monday. Thus, turning forex traders’ attention to European news and updates on the coronavirus outbreak.
Among Asian currencies, the Australian dollar fell below the $0.67 level. This was after minutes from the Reserve Bank of Australia’s (RBA) last monetary meeting renewed the possibility of further policy easing.
The Aussie was last down by 0.5% to $0.6679 against its US counterpart, while the New Zealand dollar also slipped by 0.5% to $0.6401 per greenback.
Meanwhile, the US dollar gained 0.3% to CN¥7.0061 against the yuan. The Chinese currency plummeted today as the fx market worries over the potential economic impact of the coronavirus.
The Hubei province stated on Monday that the virus slightly reduced to 1,807, compared with 1,933 recorded the day earlier.
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Euro Zone’s Economic Pessimism
Forex investors’ sentiment for the single currency has turned glum in February, as disappointing manufacturing and gross domestic product (GDP) figures from Germany signaled that external shocks have more influence on the eurozone than previously thought.
It is close to testing an important support level at $1.08 due to the diverging economic outlook between the eurozone and the US, according to senior forex strategist Junichi Ishikawa.
The single currency looks oversold. So in the very short-term, there could be a bounce, but its fundamentals still point more to the downside, he added.
The euro has shed 2.4% against the US dollar since the start of the month. Weak economic data fueled concerns over the prospect of the European Central Bank (ECB) extending an accommodative monetary policy.
The single currency will face the ZEW survey next. It is seen showing a slump in economic sentiment from the highest since July 2015.
Forecasts predict the German Economic Sentiment Index may weaken to 21.5 this month against a 26.7 reading registered last month. Predictions show that the Current Situation Sub-index will end at -10.3, compared with January’s -9.5.
The estimates could provide the EUR/USD pair with enough momentum to climb above the $1.0850 level.
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