- Euro (EUR) steady after losing in the previous session
- Surging covid cases keeping pressure on common currency
- US Dollar (USD) slips despite lack of US stimulus agreement
- Joe Biden ahead in national polls, potentially big stimulus coming
The Euro US Dollar (EUR/USD) exchange rate is treading water on Tuesday after booking losses in the previous session. The pair settled on Monday -0.35% at US$1.0808, considerably down from the high of the day US$1.0861. At 07:15 UTC, EUR/USD trades flat at US$1.0808.
A second wave of covid sweeping across Europe dragged on demand for the common currency in the previous session. The broad expectation is that the European Central Bank will need to offer more support to the economy, particularly as fiscal stimulus is slow in coming through. Fears are rising that the fragile economic recovery will be completely derailed.
The German IFO Economic Sentiment index for October declined by more than analysts expected. The weaker sentiment data came after PMI figures at the end of last week showed that business activity in the bloc, but particularly service sector activity contracted steeply in October.
This week the ECB will make its monetary policy announcement. This will be followed by the Eurozone GDP reading for the July – September period.
There is no high impacting eurozone data due today. The euro will continue to be driven by covid headlines and risk sentiment in the broader market. Reports of tighter lockdown restrictions could drag the Euro lower.
The US Dollar is trading on the back foot versus its major peers, paring some of its recent gains. The US Dollar had been driven higher on safe haven inflows as covid cases in the US also reach record numbers and US Congress still fails to break the deadlock to agree to further US fiscal stimulus.
Attention is now turning towards the US elections, with less than a week to go until the 3rd November polling day. The national polls show that Democrat Joe Biden has created a significant lead over President Trump, the Democrats are also expected to win the Senate. This could mean that significant fiscal stimulus will be on its way.
Looking ahead, US durable goods orders could provide some clues over the health of the US economy.