EUR/USD: Euro Slips As Coronavirus Back In Focus

The Euro (EUR) is slipping lower versus the US Dollar (USD) in early trade on Thursday, after closing lower on Wednesday. The Euro (EUR) US Dollar (USD) exchange rate closed the previous session -0.3% lower at US$1.1138 as US recession fears eased following strong data releases.

At 07:30 UTC, EUR/USD is trading down -0.1% higher at US$1.1125.

Euro Gives Up Data Inspired Gains

The euro traded broadly lower in the previous session following a mixed bag of data. On the one hand, German retail sales rebounded in January after a disappointing December. However German service sector data missed forecasts and raised concerns over the negative impact of coronavirus on the economy.

Growth in German service sector slowed in February to reach its lowest level in three months.  The IHS/Markit service PMI fell to 52.5 in February from 54.2 the previous month. This was weaker than the 53.3 analysts’ forecast.

The data showed that new orders stalled, with a sharp drop in orders from abroad. Given that China is Germany’s largest trading partner this is the impact of coronavirus pushing down new business with China.

Whilst the German domestic market still looks to be holding firm, that could change very quickly given the rising numbers of coronavirus cases in Europe’s largest economy. Elsewhere in Europe Italy has announced the closure of all schools.

Today there is no high impacting eurozone data for investors to focus on. Instead coronavirus headlines will be closely observed as well as leaders’ reactions, particularly surrounding the prospect of fiscal stimulus.

Coronavirus In Focus After Strong Service Sector PMI

The US dollar pushed northwards in the previous session as strong US data helped calm fears over the negative impact that coronavirus could have on the US economy.

Data on Wednesday revealed that the US service sector activity index increased to a reading of 57.3 in February. This was the highest reading since February last year and well ahead of expectations of 54.9. A figure of 50 separates expansion from contraction. The strong reading boosted the dollar.

Today there are a few mid-tier data releases such as jobless claims and factory orders. However, attention could shift firmly back to coronavirus as California declared a state of emergency as companies such as Microsoft and HSBC enact contingency plans.

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