The Euro is heading lower in early trade on Wednesday despite strong German retail sales. Safe haven flows are driving the US Dollar higher following after President Trump predicts around 240,000 Americans could lose their and as manufacturing figures across the globe show the impact of coronavirus on the economy.
At 09:30 UTC, EUR/USD is trading -0.5% at US$1.0973. This is at the lower end of the daily range.
Euro Drops Ahead of Manufacturing PMI
The Euro is slipping lower despite stronger German retail sales data. Sales jumped by 1.2%, ahead of the 0.1% forecast. However, this data is from February, before coronavirus. It is therefore considered out of date.
As coronavirus numbers show signs of stabilising in Spain and Italy investors will turn their attention to manufacturing figures. The final revision for the manufacturing PMI for March is expected to slip to 44.6 from 44.8. However, Italy is expected to see a drop to 41 from 48.7 after Lombardy, the industrial region is hardest hit by coronavirus.
US Dollar Strengthens After Trump’s Horrifying Prediction
The US Dollar is pushing higher as investors seek out its safe haven properties. Last night President Trump warned that between 110,000 – 240,000 Americans could die from coronavirus. He warned that he next two weeks could be “very, very painful”. These figures are horrifying and sent a chill through global markets. Investors moved out of riskier assets such as equities and increased flows into safe havens, such as the US Dollar.
Manufacturing data has also weighed on sentiment in early trade. Whilst China’s Caixin manufacturing PMI showed a slight expansion, this was overshadowed by weak data across the region. Exporter nations Japan and South Korea recorded steep declines in manufacturing activity. With demand from Europe and the US set to remain low amid ongoing lock downs, any recovery in manufacturing is likely to be slow.
Today investors will turn their attention to US manufacturing data. Analysts expect the data to show that the US manufacturing sector slipped back into contraction amid the coronavirus outbreak. The ISM Manufacturing PMI is forecast to fall to 45 in March down from 50.1.
US ADP employment data will also be watched closely to gauge the impact of coronavirus on the labour market ahead of Friday’s non farm payroll. The ADP private payrolls report is expected to show a drop of -150,000 jobs.
