The Eurozone is adding more countries to its quarantine list and is showing lacklustre movement, though Euro exchange rate continues upward trajectory.
The Eurozone shrank 15% for the second quarter year-on-year.
The US fiscal stimulus continues to see a delay, as talks between the two US parties remain at a deadlock. With the US elections, the currency market is expected to see a lot of volatility.
Euro Exchange Rate Affected by GDP Contraction
The EUR/USD pair is moving in an upward direction for the past two months. It bounced down from the resistance level at 1.1917 in the first week of August. The Euro currency exchange rate against the US Dollar is moving in a range between 1.1865 and 1.1710 last week to close at 1.1841 on Friday. It has further resistance at 1.1990 and 1.2072. The currency pair has a very strong support at 1.1710, 1.1683 levels.
Currently, the Eurozone has raised concerns over the rise of COVID-19 in some places. The euro is not finding fresh upward momentum among its member countries.
The Eurozone economy shrank 12.1% in the second quarter, according to Eurostat figures, the statistical office of the European Union.
The sideways action in the Euro exchange rate vs. the Dollar can be expected for another week or two.
The British Pound Outperforms Against the Greenback
The GBP/USD pair is trading within a small range between 1.304 and 1.3134 last week. The currency pair has shown a bullish trend in July, moving from 1.2358 to 1.371. The currency pair has to break above the 1.3140 level to continue to go higher. Currently, it is in a consolidation phase.
Tourism is down in the UK with the quarantine dampening the sector, which has further affected the economy.
US Dollar Index Continues Its Weekly Loss
The Dollar index briefly slipped below 93.00 levels on Thursday and managed to close above this level on Friday. If the US Dollar is unable to push past its resistance in the 94.00 regions, it will resume its bearish trend. The Dollar Index continues to close in the negative for the eighth week.
The USD continues to remain weak. The US economy is showing signs of slowing, though the US Dollar continues to dominate. Unemployment claims have dropped more than one million for the first time after the pandemic. However, the job market is not showing much strength, say analysts. The Dollar is not showing much strength against the Euro currency exchange rate.
Euro Exchange Rate Shows Notable Strength
The EUR/GBP exchange pair was down initially last week but later climbed with an upward momentum to close at 0.9047 on Friday. The Euro currency exchange rate against the US Dollar is moving within a tight range for the past three months. It saw a high of 0.9179 and 0.8863 in June and is trading within these levels in July and August. The EUR/GBP currency pair has to move below 0.8968, the lows of last week to see a downtrend.
A move above 0.9056, which is the high formed on Wednesday 12 August, will push the currency pair towards the higher limit of the range at 0.9179.
The Sterling is showing strength with renewed hope of a Brexit-trade agreement between the United Kingdom and the Eurozone. UK Chief Negotiator David Frost says that a deal might be reached next month between the two countries.
The Eurozone expects the Final CPI to be at 0.4% versus the previous data at 0.3% year-on-year. Germany’s PPI month-on-month is expected to improve from the previous month, improving from 0.0% to 0.1%. French PMI is expected to show negative data as it has a forecast of 56.3, lower than the previous data at 57.3%.
The Euro exchange rate vs. the Australian dollar is moving in a positive direction and closed at 1.6508 on Friday. The week started with some indecision for the pair. But later, it moved firmly upwards last week. It has moved from 1.6349 to move towards 1.6554. The EUR/AUD foreign exchange pair will continue to push upwards if it goes past 1.6581 levels.
The Australian dollar Index saw modest support when the RBA Governor Lowe insisted on the need for fiscal support to revive the economy. The economy needs fiscal and structural policies, says Lowe.
The NZD has been under pressure with a fresh coronavirus outbreak weakening the currency. The central bank has hinted at the possibility of below-zero rates, and the NZD suffered a minor loss. The RBNZ managed to hold on to its official cash rate of 0.25%. It has expanded its LSAP programmed (Large Scale Asset Purchase) as NZ$100 billion.
The USD/JPY foreign exchange rate moved positively last week, though it turned negative on Friday. It has moved from 105.93 to 107.06 levels
The Japanese GDP Price Index has a forecast of 1.9%, while it was 0.9% in 2019
Industrial production data show a significantly lower increase, missing expectations in China, which has prevented the US Dollar from further fall.
The Euro exchange rate against the Dollar Index faces trade concerns as the US announced tariffs on a few EU goods.