- Coronavirus flare-ups in China & record numbers in some US states keep risk sentiment in check
- Euro (EUR) investors await Eurozone inflation data which is expected to show the region on the brink of deflation
- US Dollar (USD) looks to Federal Powell’s second testimony before Congress, after a cautious tone yesterday.
- At 07:15 UTC, Euro US Dollar exchange rate (EUR/USD) trades +0.2% at US$1.1288
The Euro is pushing higher versus the US Dollar on Wednesday, paring some losses from the previous session. The Euro settled on Tuesday -0.5% at US$1.1264, almost 100 points below the high of the day.
At 07:15 UTC, EUR/USD continues to trade below US$1.13 as coronavirus fears and geopolitical tensions in Asia dominate ahead of Eurozone inflation data and Federal Reserve Jerome Powell testifying before Congress for a second day.
New covid-19 infection clusters in Beijing are unnerving investors. Chinese authorities have taken drastic measures grounding flights and closing schools in the Chinese capital in a bid to stem the spread of covid-19.
Meanwhile, in the US coronavirus cases in Florida have reached another record high and hospitalisations in Texas have surged. Fears over a second wave of infections derailing the fragile economic recovery, are keeping investors cautious.
Geopolitical tensions in Asia are adding to the cautious tone in the market. Violent clashes between Chinese and Indian officials along part of the border, in addition to escalating troubles between North and South Korea are keeping risk sentiment in check.
Euro investors will now look towards the release of Eurozone inflation data for fresh impetus. Analysts are expecting inflation, as measured by consumer prices to decline -0.1% month on month in May, down from the 0.3% increase in April. On an annual basis prices are expected to have increased just 0.1% putting the region teetering on the brink of deflation.
Whilst there is no US macro data to focus on today, investors will look ahead to a second testimony by Federal Reserve Chair Jerome Powell before Congress. Yesterday, Powell stuck a cautious tone warning that output and unemployment levels wouldn’t recover to pre-coronavirus levels for a long time.
His comments came shortly after US retail sales smashed expectations, surging by 17.7% in May. This was well ahead of the 8% increase than analysts had pencilled in. It also made up for April’s -16.6% decline in sales, whilst boosting hope that a quick economic recovery was still possible.
