- Euro (EUR) advances although gains could be limited on covid-19 resurgence concerns
- Economic data continues to show signs of improvement, economic sentiment and inflation figures up next
- US Dollar declines as risk sentiment see saws and reopening plans in some states halt. Important week for US data.
- Euro US Dollar exchange rate rises above US$1.1250
The Euro is heading northwards at the start of the week, adding to 0.3% gains from the previous week. The Euro US Dollar exchange rate settled on Friday at US$1.1219.
At 07:15 UTC, EUR/USD is trading +0.35% at US$1.1258 at the top end of the daily traded range as inflation data and economic sentiment figures are in focus.
Spanish inflation printed at +0.5% month on month in June, ahead of the 0.2% forecast. The upbeat reading comes ahead of German consumer price data which is due shortly and is expected to show a 0.3% increase month on month. However, on an annual basis inflation is expected to increase just 0.6%, well below the target 2%.
The data comes after European Central Bank policymaker Isabel Schnabel warned that eurozone inflation could dip below 0%.
Any gains in the Euro could be limited as risk sentiment remains weak. Whilst economies across the region continue to reopen, localised flare ups in covid-19 numbers are also a concern. European equities are trading lower.
Usually the US Dollar moves higher when risk sentiment is under pressure, as investors seek out its safe haven properties. Today the US Dollar is lower as risk sentiment see saws. Fears of a resurgence of covid-19 cases circulate as California’s Governor ordered the shutdown of bars across 7 counties including Los Angeles. He also recommended similar action across a further 8 counties. As states reconsider or slow their reopening plans, investors are weighing up the impact that this could have on the economic recovery.
On a positive note and boosting risk sentiment, data from the national bureau of statistics in China revealed that Chinese factories returned to profit for the for the first time in 6 months in May as the world’s second largest economy continues to reopen.
On the domestic data front, US pending home sales will be in focus, ahead of PMI data and non-farm payroll figures later in the week.