- Euro (EUR) consolidates gains as economic recovery seen to be gathering pace
- German IFO sentiment data expected to push higher
- US Dollar (USD) extends declines on US – Chinese tensions and fears over the US recovery
- US durable goods orders in focus
The Euro US Dollar exchange rate (EUR/USD) is extending gains from last week. The pair rallied 2% across the previous week, settling at US$1.1656. At 07:15 UTC, EUR/USD trades +0.5% at US$1.1713.
The Euro continues to advance, supported by the rescue package agreed by the EU leaders last week and by encouraging Eurozone data. The common currency is trading close to 22 month highs despite signs of a second wave of coronavirus outbreak in Spain and Germany.
Data at the end of last week showed that activity in the manufacturing and service sector rebounded from the pandemic hit, boosting optimism that the eurozone’s economic recovery is gathering pace.
Attention will now turn towards German IFO investor sentiment data. Analysts are expecting business sentiment to improve to 89.3 versus 86.2 in the previous month. A strong reading could lift the Euro higher.
The US Dollar trades on the back foot as concerns over rising US coronavirus statistics persist and as investors increasingly fear that the surging rate of infections is undermining the fragile US economic recovery. The US has over 4.1 million confirmed coronavirus cases. Data last week showed that the recovery in the US labour market has stalled as lock downs are re-imposed in some areas of the sunbelt in at attempt to control virus numbers.
US – Chinese tensions are also dragging on the greenback after the Chinese consulate in Houston was closed and the Chinese reacted in kind by closing the US consulate in Chengdu. US Secretary of State has called or a new alliance of democracies to stand against China. The falling US Dollar is in sharp contrast to the safe haven flows that the USD has enjoyed previously amid rising US – China tensions.
Looking ahead, investors will focus on US durable goods data for further clues as to the progress of the economic recovery. Analysts are expecting durable goods to increase a solid 7.2% after jumping 15.7% in May.