The euro is consolidating losses after falling its lowest level since 2017 on Wednesday. The euro dropped to nadir of US$1.0865 as the slump in the common currency appears to be gaining momentum. The euro US dollar closed the previous session just above the low of the day after losing 0.4%.
The euro has shed over 3% versus the dollar so far this year amid growing concerns over the health of the eurozone economy, fears that the German economy could be heading for recession and worries surrounding German Chancellor Angela Merkel’s succession plan.
Data in the previous session revealed that Eurozone industrial output slumped -2.1% month on month in December, down from a 0.2% increase in November. Annually industrial output dived -4.1%, significantly off the -1.7% decline pencilled in.
Data last week showed that the slump in the manufacturing sector in Germany was still in full swing. Yesterday’s data confirms the bloc is in a similar position. Add in concerns that coronavirus will also have a slowing impact and economists are starting to lower German GDP expectations. A German recession is not a distant possibility. Fourth quarter German GDP data is due for release on Friday.
Today investors will look towards German inflation data. Analysts are forecasting that consumer prices remained steady in January at 1.7%.
The dollar traded on the front foot in the previous session as Federal Reserve Chair Jerome Powell gave his second testimony before Congress. US dollar investors also digested stronger mid-tier data.
Today the dollar is trading broadly higher versus its peers as flows into safe havens are on the rise following the deadliest day in the coronavirus outbreak. The number of deaths in the Hubei province jumped by 242, whilst the number infected also climbed by 14,860 as China altered the way that it diagnosed cases.
US inflation data could boost the dollar further today. Analysts are expecting inflation to increase 0.3% month on month in January, up from 0.2% the previous month. On an annual basis inflation is expected to rise to 2.5% up from 2.3%.