- Euro (EUR) pares losses from previous session after European Commission cut the region’s economic growth forecasts
- ECB President Christine Lagarde hints at inaction in next week’s ECB meeting
- US Dollar (USD) remains supported on coronavirus fears, which were further fuelled by Federal Reserve policymakers’ concerns
- Euro US Dollar exchange rate (EUR/USD) pares losses from the previous session but remains capped by US$1.13
The Euro US Dollar exchange rate settled on Tuesday -0.3% at US$1.1272. At 07:15 UTC, EUR/USD trades +0.2% at US$1.1290.
The Euro was under pressure in the previous session after the European Commission cut its economic outlook for the region again. In the Summer Economic forecasts, the EC predicted that the Eurozone economy will shrink by -8.3% in 2020, rebounding by 5.8% in 2021. Just in May, the EC had predicted -7.4% contraction and a 6.1% rebound in 2021. The moderated forecasts dragged on demand for the common currency.
Today, the Euro is pushing higher despite European Central Bank President Christine Lagarde hinting that she will press the pause button on stimulus at next week’s ECB meeting. In an interview with the Financial Times Christine Lagarde as good as confirmed that the ECB will switch back to its wait and see mode to asses the effectiveness of action taken so far. She also pushed for further fiscal stimulus from governments across the region.
There is no high impacting Eurozone data due today. Investors will look ahead to tomorrow’s Eurogroup meeting.
The US Dollar rallied in the previous session and is holding those gains in early trade on Wednesday as coronavirus concerns continue to weigh on risk sentiment and geopolitical fears also pick up.
The Trump administration is reportedly weighing up a proposal to undermine Hong Kong’s US Dollar peg to punish China for the recent national security law which limits political freedom in the financial hub. Tension are already elevated between the US and China and such a move could raise the stakes.
There is no high impacting US data due for release today. Investors will look ahead to US jobless claims numbers tomorrow for further clues over the progress of the economic recovery in the US.
