Despite a stronger start the Euro is slipping lower versus the US Dollar on Friday, marking its third straight day of losses. The Euro US Dollar exchange rate declined 0.45% on Thursday to settle at US$1.0859.
At 08:15 UTC, EUR/USD is trading down -0.2% at US$1.0830. This is at the lower end of its daily traded range of US$1.0830 – US$1.0880 amid concerns that the emergency fiscal aid by the European Union isn’t sufficient to cushion the blow of the coronavirus outbreak on the economy.
ECB Could Need To Do More
The Euro has pared earlier gains as fears are growing that more than half a trillion euros of fiscal aid from the EU isn’t sufficient. Just over a week after the accord, strains are reappearing in the markets meaning that the onus could be back on the European Central Bank to cut interest rates.
Today investors will look towards eurozone inflation data. Analysts are expecting inflation to increase just 0.7% in March, down from 1% in the previous reading and well short of the 2% target. Tumbling oil prices and collapsed consumption amid the lock down mean inflation will have weakened. A weak inflation reading would add to evidence supporting a rate cut by the ECB.
Trump Talks Of Reopening US Economy
The US Dollar started the session on the back foot as risk sentiment improved. Talk by President Trump of rolling back restrictions and reopening the US economy boosted the mood in the market. As did reports of a covid-19 treatment drug, by Gilead, showing encouraging results in clinical trials.
These factors over shadowed data which showed that the Chinese economy contracted by the most on record in the first three months of the year. The Chinese GDP for January – March, the period when China was most affected by the coronavirus outbreak, was -6.8%. This was worse than the -6.5% forecast. Retail sales also showed a continued decline. However, industrial output only dipped slightly suggesting the recovery in the sector is underway.
The weak data from China came following data in the US showing that the number of American filing for unemployment benefit has topped 21 million over a 4-week period. The numbers indicate that any recovery in the US economy could be a drawn out process rather an a quick rebound.
