• Euro (EUR) is under pressure as German GDP expected to show -9% QoQ contraction
  • German unemployment and eurozone consumer confidence also in focus
  • Federal Reserve kept policy unchanged but pledged to do whatever was necessary as the pandemic continues
  • US GDP expected to show -34.1% contraction YoY in Q2

The Euro US Dollar (EUR/USD) exchange rate is heading lower on Thursday, paring gains from the previous session. The pair settled on Wednesday +0.6% at US$1.1792 after briefly piercing US$1.18, a level last seen in September 2018.

At 07:15 UTC, EUR/USD trades -0.3% at US$1.1760. This is at the lower end of the daily traded range.

The Euro is edging lower as investors look ahead to a slew of data releases including German unemployment and Eurozone consumer confidence. However, the main focus will be on German GDP data.

The GDP reading is expected to confirm that German entered the deepest recession since World War 2 with high levels of economic pain. Analysts are expecting the German economy to have contracted -9% quarter on quarter in the three months April – June. This comes after the economy shrank by -2.2% in the first quarter of the year.  A better than forecast reading could boost the Euro, whilst a weaker than expected number could unnerve investors and send the Euro lower.

The Dollar is showing some signs of life after selling off in the previous session. The Federal Reserve kept monetary policy unchanged with Federal Reserve Chair Jerome Powell giving the markets a reality check. Mr Powell highlighted that the covid pandemic was far from over and that the US economy was facing mounting challenges. He said that the recovery is slowing. The Fed promised to use its full range of tools if needed.

Attention will now turn to the US GDP for the second quarter April – June period. The GDP reading expected to be grim as lockdown caused consumer spending to slow significantly and business investment to dry up. Analysts are expecting the economy to have contracted -35% on an annual basis in the second three months of the year. This will be the deepest contraction recorded since World War 2. A weaker than forecast number could send the US Dollar tanking lower.