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EUR/USD tumbles to seven-week low as Eurozone faces double-dip recession

currency-newsEUR/USD tumbles to seven-week low as Eurozone faces double-dip recession
The euro remained on the defensive yesterday as the Eurozone’s latest GDP figures all but confirmed the bloc is in the midst of a double-dip recession.
 
Meanwhile, the pound remains in a narrow range this morning, with GBP/EUR stable at €1.1352 and GBP/USD flat at $1.3670. GBP/CAD is muted at C$1.7456, while GBP/AUD and GBP/NZD are subdued at AU$1.7928 and NZ$1.8939, respectively.
 
Coming up, the focus this morning will be on the Eurozone’s latest consumer price index. Will a rebound in inflation help to take some of the pressure off the euro?
 

What’s been happening?

The euro continued to trend lower through yesterday’s trading session, with the EUR/USD exchange rate nearing a key barrier of resistance at $1.20.
 
This slump in the single currency came as a smaller-than-expected contraction in the Eurozone economy in the last quarter of 2020 failed to offset fears the bloc is facing a double-dip recession, particularly amidst concerns the EU’s slow vaccination rollout could lead to extended lockdowns across the continent. 
 
The US dollar, meanwhile, enjoyed some notable support on Tuesday as a risk-off mood continued to prevail amidst ongoing US stimulus uncertainty, resulting in investors continuing to favour the safe-haven currency.
 
Finally, the pound saw only limited movement yesterday as the UK’s success with its vaccination programme was offset by ongoing uncertainty over whether the government will be willing to ease its lockdown measures this month.
 

What’s coming up?

In the spotlight today, we have the publication of the of the Eurozone’s consumer price index.
 
This morning’s release is expected to report that after five consecutive months of deflation, inflationary pressure in the Eurozone finally turned positive last month, which if correct, may open the door for the euro to claw back some of its recent losses.
 
In the UK, the release of January’s finalised PMI figures is likely to see the pound maintain its narrow trend as they are expected to confirm growth in the UK’s vital sector slumped to an eight-month low at the start of the year.
 
Closing out today’s session will be the publication of the latest ISM non-manufacturing PMI, which could stoke demand for the safe-haven US dollar if a slowing of the US service sector adds to the risk-off mood later this afternoon.
Philip McHugh

Philip McHugh

Joining the corporate trading desk in 2007, Phil now over sees all of Currencies Direct’s corporate dealing activity. Having gained experience working with hundreds of businesses to optimise international payments processes and execute comprehensive risk management strategies, Phil currently works with a portfolio of corporate clients whilst managing Currencies Direct’s overall market exposure

Phil has FCA approval and has completed the Certificate in International Treasury Management (CertiTM)

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