The Euro US Dollar exchange rate is stuck trading within a familiar range on Tuesday after slipping lower at the start of the week. The pair settled on Monday -0.3% at US$1.0808.
At 08:15 UTC, EUR/USD is trading +0.05% at US$1.0814 amid growing fears of a second wave of coronavirus infections and ahead of US inflation data.
EUR: German Covid-19 Transmission Rate Stays Above 1
With no major data releases from the eurozone, risk sentiment is driving movement in the Euro. Investors are growing cautious over the possibility of a second wave of coronavirus infections hampering the reopening of economies.
In Germany, the R rate, according to the Robert Koch Institute, is at 1.07. A level above 1 means that the number of infections are growing. This is the third day that the transmission rate, R, remains above 1. So far, Germany hasn’t slowed its pace of easing lockdown measures, however with the number of new infections on the rise investors are nervous that Europe’s largest economy could soon apply the brakes.
The Eurozone economic calendar is light today. Investors will look ahead to Eurozone industrial production data tomorrow. Analysts are forecasting a -12.1% decline month on month in March, well down from the 0.1% monthly drop in February.
USD: US Inflation To Drop -0.8% MoM
The US Dollar is holding onto gains from the previous session owing to continued safe haven flows. Attention will now turn towards US inflation data and Federal Reserve policy makers who are due to speak later in the session.
Analysts are expecting US inflation, as measured by consumer prices, to tumble -0.8% month on month in April, as consumption dried up and oil prices plummeted 60%. On an annual basis inflation is expected to print at 0.4%, well below the Fed’s 2% target.
Core inflation, which excludes more volatile items such as food and fuel are expected to decline -0.2%, following a -0.1% drop in March. This would be the largest monthly drop in core prices in 20 years.
Weaker than forecast inflation data could drag the US Dollar lower as the prospects of a rate hike are pushed further into the distance. A weak reading could also boost discussions surrounding the prospects of negative interest rates in the US, which could weigh on the US Dollar further.
