- Euro (EUR) heads lower on weakening risk sentiment as coronavirus fears overshadow stronger data
- Eurozone inflation is expected to beat forecasts after strong Spanish and German inflation numbers on Monday
- Safe haven US Dollar (USD) rises as US – Chinese tensions build and Federal Reserve Chairman warns of an extraordinarily uncertain recovery.
- Euro US Dollar (EUR/USD) exchange rate moves lower targeting US$1.12 after two straight days of gains
The Euro US Dollar exchange rate settled on Monday +0.17% at US$1.1242. However, the pair is unable to hold gain trading -0.2% at US$1.1210 as the mood in the market sours and ahead of Eurozone inflation.
The World Health Organization (WHO) has warned that the worst of the coronavirus pandemic is yet to come. The warning comes as more US areas take measures to scale back reopening. Australia, Germany and the UK are also re-imposing localised lockdowns to stem the spread of covid-19 flare ups.
The risk off mood is dragging on demand for the Euro whilst boosting demand for the safe haven US Dollar.
Eurozone inflation data is due to be released shortly. The data comes after the ECB’s Isabel Schnabel warned that inflation in the region could fall below 0.
Analysts are expecting consumer prices in the Eurozone to have increased 0.1% in June compared to the year before. However, given that both German and Spanish inflation readings beat forecasts in the previous session there is a good chance that today’s data print could also exceed expectations.
The safe haven US Dollar weakened in the previous session after pending US homes sales smashed expectations and boosted hopes of a speedy recovery in the housing market. Home sales jumped +44.3% in May, after plunging in April. This was well ahead of the 18.9% increase forecast.
The mood in the market soured over night after Beijing passed the National security law on Hong Kong. The legislation has stoked fears that the territory’s autonomy will be undermined. The measure is expected to trigger counter measures from the US and other countries.
Looking ahead investors will focus on a speech by Federal Reserve Chairman Jerome Powell. The speech comes after Jerome Powell warned of an extraordinary uncertain path to economic recovery amid efforts to control the coronavirus pandemic.