Euro Weak Despite Risk Appetite, Positive Economic Data

Markets were in a risk-on mode on Monday. Usually, positive market sentiment is good for the euro but that was not the case today. The shared 19-nation currency fell against almost all of its most-traded rivals, managing to gain only on safe currencies, which seemed unattractive for traders amid risk appetite. And even then, the euro failed to beat the US dollar, which is considered to be one of the safe-haven currencies.
The news about the victory of Joe Biden in the US presidential race and about a coronavirus vaccine being near completion made investors optimistic and willing to risk. And that should have allowed the euro to gain on the greenback. Yet EUR/USD was heading to settle with a loss. Some market analysts explained such an unusual behavior by the “buy the rumor, sell the fact” strategy, arguing that traders were taking profit after buying the currency pair when it was on a rise. But that does not explain the euro’s weakness against other currencies.
Macroeconomic reports released in the eurozone on Monday were good but they were unable to help the euro. Destatis reported that the German seasonally adjusted trade balance widened to â‚¬17.8 billion in September from €15.4 billion in the previous month, slightly above the market consensus of â‚¬17.2 billion. The Sentix economic sentiment for the eurozone worsened from -8.3 in October to -10.0 but was above the analysts’ expectations of a drop to -15.0. The report explained why the sentiment worsened but was not as bad as one could expect:

The rising number of positive PCR test results is causing politicians to fear an uncontrolled spread of the corona virus. Although the serious consequences of a lockdown on economic development were experienced in March, most governments in Europe are going down the path of renewed contact restrictions. Although these do not have the same negative effect as in March, they do dampen the economic recovery process. Surprisingly, however, the effect on the sentix business cycle index is surprisingly limited at -1.7 points on an overall index of -10 points. The reason for this “mild lockdown” is probably the positive dynamics in Asia and the USA.

EUR/USD dropped from 1.1887 to 1.1819 as of 21:15 GMT today. EUR/GBP declined from 0.9026 to 0.8980. Meanwhile, EUR/JPY surged from 122.77 to 124.53, touching the high of 125.13 intraday.
If you have any questions, comments, or opinions regarding the Euro, feel free to post them using the commentary form below.

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