German ZEW Economic Sentiment saw a decline from 61.2 to 40.4 in August. The Euro to USD currency pair is at a multi-month low at 1.1740 on August 12, 2021.
The ZEW Current Economic Conditions is at 29.3 in August, while it was at 21.9 in July. It is the third decline in the German economy.
The Euro to USD is down at a four-month low, at levels last seen in April. The EUR/USD currency pair is on a downward trajectory, and it continued its decline after the release of data on the German ZEW Economic Sentiment. 1 Euro in USD is at 1.1740 on August 12, 2021.
Currently, the exchange rate Euro to USD is trading at 1.1740 levels. If the currency pair leaves the support taken on March 31, 2021, at 1.1703, it may see a sharp fall towards the 1.16 levels.
Poor German ZEW Indicator Reflects on Euro to USD
Another corona wave may sweep the Eurozone in August, predict medical experts.
ZEW President Achim Wambach says that Germany has a tough time ahead if the fourth wave of the virus hits the country again.
The slowdown in China is another factor for the economic downturn in the country. Trade between Germany and China has come down, resulting in lower production.
The European data shows tepid growth. Though manufacturing output looks positive, the service sector is moving lower.
The German Trade Balance moved higher from 12.8B to 13.6B. But the German Industrial Production m/m drifts lower from -0.8% to -1.3%%. Industrial production is one of the leading indicators of German economic health. Lower production indicates slowness in the business cycle which reflects on employment and earnings. The supply chain disruptions are hurting production. The employment rate is sluggish, especially hitting the younger population, between 24 to 30 years.
However, German factory orders month-on-month has been good. It shows good improvement from -3.2% to 4.1%, though the forecast was at 2.1%. A reading below expectations does not reflect well on the currency, especially as the Euro is sliding lower.
The Eurozone grew by 2% in the second quarter of 2021. In the Eurozone, Italy and Spain were worst affected by the corona pandemic in 2020 and 2021. The two largest economies of the Eurozone, Germany, and France show moderate growth of 1.5% and 0.9%. In Germany, household spending has gone up. In France, the travel and hospitality sector shows growth.
EUR/GBP and the Sharp Contrast between the Two Regions
There is a stark contrast between the monetary stance taken by the BoE and the ECB. The UK economy is returning to pre-pandemic levels. The interest rates of the BoE are at 0.10%. Bank of England may raise interest rates soon as the economy recovers from the pandemic. Easing of stimulus measures will help the economy will be possible, say authorities.
ECB may bring in a loose monetary policy if inflation gets below the 2% target, which will drag the pair lower. The Dollar to Euro today is trading at 0.8519 on Thursday, August 12, 2021. The Euro to Dollar conversion pair is trading below the previous low reached on April 2, 2021, and it has the next support at 8.300, where the exchange rate Euro to USD was trading on February 2020.
The British Pound to Euro currency change is at €1.1770. The most popular British Pound exchange rate is the Dollar Euro exchange rate. The British Pound shows remarkable recovery amid expectations of tightening in the monetary policy.
The Euro converter to British Pound is at the 2021 lows at 0.8480. The EUR/GBP foreign currency exchange slipped below the March 2021 lows. If the decline continues, the euro exchange rate may drift to the April 2020 lows of 0.8298 levels. The Euro converter to Sterling’s downfall continues after it fell below the psychological 0.85 levels last week.
1 USD in Euro is at €0.85. The currency change was trading at €0.84 on July 31, 2021, increasing by 1.17% in a week.
EUR/JPY Enjoys Good Trade Partnership
The Economic Partnership Agreement between the EU and Japan has made it cheaper for trade between these two regions, for manufacturers and farmers. In particular, wine and cars are the two sectors that benefit from the deal.
US Dollar Strengthens
The demand for the US Dollar adds pressure to the Euro. The contraction in the German economy is at 40.4, much below the expected levels at 56.7. The voting of the $1.2 trillion infrastructure bill later pulls the greenback higher, say analysts.
Fed Vice Chairman Richard Clarida said that reaching economic targets has become easier in the US. It is possible to attain the set targets by the end of this year. Rates will start moving higher, he says.
The US Treasury yields are moving higher as the US Dollar Index strengthens to the 93.00 levels. Good economic sentiment and passing of the Bill are driving the Dollar Index higher to 92.99 levels. Crude prices and gold prices are falling lower as the safe-haven Dollar value increases.