EUR/USD Outlook Remains Bleak as ECB Forecasters Predict Economic Slump
ECB Survey and EUR/USD Price, News and Analysis:
- Euro Area real GDP slashed to -5.5% for 2020 but jumping to 4.3% in 2021
- EUR/USD unable to gain any positive traction.
ECB Survey Shows 2020 GDP Turning Heavily Negative.
According to the latest ECB survey, the Euro Area economy will contract by 5.5% in Q1, sharply lower than last quarters report when the block was expected to grow by 1.1% this year. Today’s report also showed a sharp bounce in 2021 GDP growth to 4.3% from 1.2%, driven higher by the impact of ‘mitigation measures’. The survey also showed unemployment rising to 9.4% this year from 7.5%, while inflation is expected to fall to 0.8% from 1.2% in the Q1 report.
The Euro Area Markit manufacturing PMI final released earlier today just missed last week’s preliminary reading, printing at 33.4 versus 33.6 and 44.5 in March. According to data provider Markit, output, new orders, export sales and purchasing activity ‘all fell at record rates, whilst supply side constraints intensified to an unprecedented extent. Confidence about the future sank to a fresh series low’. German factory orders (March) are released on Wednesday at 07:00 UK and are expected to slump to -10.0% from -1.4% in February.
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The Euro continues to slip lower after touching a 1.1018 one-month high last Thursday. Last week’s rally was driven by month-end portfolio rebalancing with strong demand for the Euro and notable USD sellers. The 200-dma also acted as resistance to the rally and looks likely to stem any further attempt at the upside. EUR/USD has also broken back below the 50-dma and the 38.2% Fibonacci retracement level at 1.0965. A cluster of old highs and the 20-dma between 1.0910 and 1.0882 should act as preliminary support.
EUR/USD Daily Price Chart (October 2019 – April 30, 2020)
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