- Euro (EUR) continues selloff as France & Germany announce national lockdowns
- ECB expected to prepare the market for additional stimulus in December. Could national lockdowns bring this forward?
- US Dollar (USD) advances on safe haven flows
- US Q3 GDP expected to show 31% rebound
The Euro US Dollar (EUR/USD) exchange rate is extending losses for a fourth straight session on Thursday. The pair settled -0.4% lower in the previous session at US$1.1744, approximately in the middle of the daily traded range. At 07:15 UTC, EUR/USD trades -0.1%% at US$1.1710.
The Euro is under pressure after France and Germany announced month long national lockdowns to restrict the spread of covid as the number of cases surge. The prospect of another lockdown hampering the fragile economic recovery has weighed on demand for the common currency.
Attention will now turn to the European Central Bank monetary policy announcement. With coronavirus cases increasing and October’s PMIs showing business activity in contraction, the ECB are expected to provide more stimulus to the economy. The question now is not if but when? December had been earmarked by the market for additional stimulus. However, will the new national lockdown announcements in the Eurozone’s largest economies prompt the ECB to take pre-emptive action today? The Euro has been skidding lower across the week in anticipation of a dovish meeting.
Ahead of the ECB announcement, investors will look towards German unemployment and Eurozone consumer confidence data.
The US Dollar remains well supported on Thursday thanks to safe haven inflows. With the second wave of covid set the hamper or even derail the economic recovery, investors are seeking out the US Dollar’s safe haven protection.
Attention will now turn towards the US GDP for the July – September period. The GDP is expected to show 31% growth, after contracting -31.4% on an annual basis in Q2. This would be a record breaking rebound after a record-breaking contraction. However, this does not mean by any stretch of the imagination that the economy is back to where it started. Let’s not forget that 50% of 100, is significantly larger than 50% of 50.
What this data will prove is that the US is in desperate need of additional stimulus. However, any new rescue package looks unlikely prior to the election.