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Weekly roundup: Will the euro benefit from US dollar weakness this week?

currency-newsWeekly roundup: Will the euro benefit from US dollar weakness this week?
The euro’s gains from last week were clipped today following the release of July’s German retail sales figures, which fell unexpectedly by -0.9% despite forecasts of an increase by 0.5%. Consequently, EUR traders have become steadily more concerned for the Eurozone’s powerhouse economy’s recovery as coronavirus cases rise in Europe.

This week saw the euro benefit from better-than-expected German unemployment data and the release of the final Eurozone manufacturing PMI for August holding steady just inside growth territory at 51.7.

Chris Williamson, the Chief Business Economist at IHS Markit, was confident about the data, saying: ‘Eurozone factory output rose strongly again in August, providing further encouraging evidence that production will rebound sharply in the third quarter after the collapse seen at the height of the Covid-19 pandemic in the second quarter.’

However, with order book growth cooling in August, many analysts have urged investors to remain cautious, as the Eurozone could come into further difficulties in the near future as Covid-19 cases steadily rise.

Wednesday’s release of the German retail sales for July disappointed, leaving many EUR traders feeling jittery, as the Eurozone’s largest economy continues to raise concerns for the bloc’s economic progress.

Adding to worries over German data, the latest CPI release showed the Eurozone slipped back into deflation, weighing on euro exchange rates.

Looking ahead, Thursday will see the publication of the Eurozone’s PMI composite figure for August. If this confirms consensus and remains relatively strong at 51.6, then we could see the EUR head higher against its peers.

Friday’s German factory orders for July will also provide a glimpse into the bloc’s powerhouse economy’s performance this week. As a result of any unexpected uptick in orders, we could see the euro rise.

The euro could also continue to benefit from its negative-correlation to the US dollar. Any signs of China’s economy continuing to improve, for instance, would weaken the ‘Greenback’ and buoy demand for the single currency. 
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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