The euro continued its downward trajectory versus the US dollar on Monday. The euro US dollar exchange rate dropped to a 2-month low of US$1.1010, before closing the session just marginally higher. The euro slipped following weak German data, whilst the safe haven US dollar received a boost amid ongoing coronavirus concerns.
The euro US dollar exchange rate is holding steady in early trade on Tuesday, finding support at the key psychological level of US$1.10.
German IFO business confidence data disappointed in the previous session. Both the current climate and expectation indices unexpectedly fell as prospects in the service sector and the construction sector deteriorated. These are two sectors that had supported the German economy in recent quarters. A bright spot on the report was the manufacturing sector, where the slowdown is showing signs of stabilizing. Whilst the sector is still contracting, it is doing so at a slower rate.
There is no high impacting eurozone data due until Wednesday with the release of GFK consumer confidence. Today the euro could be vulnerable to sentiment. Increased concerns over coronavirus could drag on the euro, whilst lifting the safe haven dollar.
US Durable Goods Data Up Next
The dollar trended higher in the previous session as fears grew over the speed that the Chinese coronavirus was spreading. Moves by Chinese authorities to slow down the deadly virus have had little effect, with 80 deaths at the time of writing and over 2744 infected in China. As the virus spreads, demand for the safe haven dollar increases.
The rally in the US dollar was kept in check after data revealed that US home sales declined for a third straight month in December. Sales dropped by -0.4% owing to a shortage of more affordable homes.
Today investors will continue to assess the coronavirus threat and its potential impact on global growth and trade. Investors’ attention could also settle on US durable goods orders, which could offer support to the dollar. Analysts are expecting a 0.9% increase month on month, up from a -2% decline in November. This will be one of the last data releases ahead of the Federal Reserve monetary policy announcement on Wednesday.
| What do these figures mean? |
| When measuring the value of a pair of currencies, one set equals 1 unit and the other shows the current equivalent. As the market moves, the amount will vary from minute to minute.
For example, it could be written: 1 EUR = 1.12829 USD Here, €1 is equivalent to approximately $1.13. This specifically measures the euro’s worth against the dollar. If the U.S. dollar amount increases in this pairing, it’s positive for the euro. Or, if you were looking at it the other way around: 1 USD = 0.88789 EUR In this example, $1 is equivalent to approximately €0.89. This measures the U.S. dollar’s worth versus the euro. If the euro number gets larger, it’s good news for the dollar. |
