The euro fell sharply yesterday in response to forecasts the Eurozone economy is set to shrink up to 8.7% in 2020.
The single currency was left on the back foot against its rivals as policymakers signalled a willingness to loosen monetary policy further in June.
Even though May’s Eurozone services PMIs saw a solid rebound from the previous month’s dismal performance, this was not enough to offer EUR exchange rates any particular boost.
The relative strength of the US dollar also limited the appeal of the euro, thanks to the negative correlation of the EUR/USD exchange rate.
Fresh commentary from ECB policymakers could put additional pressure on the single currency in the days ahead if signs continue to point towards a dovish move.
May’s Eurozone business confidence index may drive some additional volatility for EUR exchange rates as markets look for signs of improvement.
Unless business and consumer sentiment show signs of picking up in the face of easing lockdown conditions, the mood towards the euro could remain bearish.
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