After gaining 0.6% versus the US Dollar in the previous session, the Euro is on the back foot in early trade on Wednesday.

The Euro versus US Dollar exchange rate settled on Tuesday at US$1.0981, close to its high of the day of US$1.0988, the highest level reached since early April.

At 08:15 UTC, EUR/USD is trading -0.25% at US$1.0952. This is the lower end of the daily range of US$1.0949 – US$1.0991, as investors consider the possibility of an early reopening of the US economy and look ahead to US retail sales data.

Eurozone Economy To Contract -7.5%

The Euro is edging lower despite coronavirus statistics still showing signs of improvement. Spain and Italy, the worst hit regions, have reported the lowest number of cases in a month. Cases in Germany also fell for a sixth straight day ahead of talks between Chancellor Angela Merkel and regional premiers on a possible easing of restrictions on public life.

In the previous session the International Monetary Fund (IMF) said that the eurozone economy is expected to contract by -7.5%. The economic situation in Italy and Spain is expected to be particularly difficult with GDP forecast to contract by 9.1% and 8% respectively.

Adding to the negativity, the Bank of France reported that retail sales dropped by 24% in March and 7.2% in the first quarter of 2020. The lock down measures keeping the public at home mean that consumption levels have plummeted.

US Retail Sales & Beige Book In Focus

The US Dollar is advancing after President Trump boosted optimism that the US economy could be open for business by 1st May. He even suggested that some states could even open prior to this. This comes after the IMF warned that the US economy could contract 5.9% this year.

Attention will now turn to US retail sales data. Analysts are expecting retail sales to plummet -8% month on month in March, down from a 0.5% decline in February. This would be the largest drop in retail sales on record, as the coronavirus lock down sent consumption off a cliff.

The other important data release today is the US beige book. This report includes anecdotal evidence from Federal Reserve’s regions and serves as a guide to the Fed’s monetary policy decision due in two weeks.