Euro to US Dollar (EUR/USD) Exchange Rate Dips as German Inflation Falls into Negative Territory

EUR/USD Exchange Rate Falls as Outlook for German Economy Dims

The Euro to US Dollar (EUR/USD) exchange rate dipped today, with the pairing currently trading around $1.194.

The Euro struggled today following the release of the flash German Harmonised Index of Consumer Prices data for November, which fell below forecasts to -0.7%.

Germany’s Federal Statistics Office commented on the data:

‘The inflation rate is influenced, among other things, by the reduction in value-added tax that came into force on July 1, 2020.’

Meanwhile, the outlook for the German economy – the largest in the Eurozone – looks increasingly uncertain as the nation’s Covid-19 infection rate passed one-million.

However, EUR investors are becoming more optimistic, with hopeful that a Covid-19 vaccine could gain approval by mid-December in Germany.

As a result, the Eurozone’s powerhouse economy could recover faster than was previously expected.

Last week, however, saw the German Chancellor Angela Merkel confirm the extension of the nation’s partial lockdown.

Consequently, the EUR/USD exchange rate has remained under pressure at the beginning of this week.

US Dollar (USD) Rises Despite Dwindling Demand for Safe-Haven Currencies

The US Dollar (USD) has also continued to struggle today owing to growing optimism overt a rollout of a Covid-19 vaccine. As a result, demand for the safe haven ‘Greenback’ has slipped over the past few weeks.

Furthermore, the outlook for the American economy looks increasingly problematic, with fears of a possible third wave of Covid-19 threatening to derail the nation’s economic recovery.

Dr Anthony Fauci, the top US disease expert, warned:

‘There is almost certainly going to be an uptick because of what has happened with the travel.’

In US economic news, today saw the release of the Pending Home Sales report for October, which fell below forecasts to -1.1%.

As a result, USD investors are becoming increasingly concerned as the outlook for the world’s largest economy looks increasingly uncertain.

EUR/USD Outlook: Could Hopes of a Covid-19 Vaccine Rollout Drag Down Safe-Haven Currencies This Week?

US Dollar (USD) traders will be awaiting tomorrow’s release of the latest US Manufacturing data.

Any improvement in the outlook for the world’s largest economy could boost the appeal of the ‘Greenback’.

Also, we could see demand for the safe-haven US Dollar increase if Jerome Powell, the Chairman of the Federal Reserve, is downbeat about the US economy’s future.

Euro (EUR) investors will be eyeing tomorrow’s release of Germany’s Unemployment Rate for November. If this continues to edge higher, however, we could see the EUR/USD exchange rate fall.

However, the US Dollar (USD) could continue to be weakened by increasing risk sentiment as hopes of a Covid-19 vaccine rollout boost global market mood.